TradFi Firms Embrace Public Blockchains for Tokenization

According to Celisa Morin, a former Grayscale executive, traditional financial institutions are increasingly interested in tokenizing assets on public blockchains. This shift in preference towards public chains can be attributed to a narrative led by BlackRock, a renowned financial firm. Morin, who is now the head of crypto at international law firm Reed Smith, believes that larger financial institutions are likely to follow BlackRock’s lead. BlackRock recently launched a $100 million tokenized fund called BUIDL on the Ethereum network, which has now accumulated $288 million in assets.

BlackRock’s decision to tokenize assets on Ethereum faced some controversy, with the firm’s on-chain wallet being targeted by crypto enthusiasts. Deposits to the public wallet included transactions from the legally dubious Tornado Cash mixer, as well as various cryptocurrencies from real-world asset tokenization projects and memecoins. Despite the potential legal challenges associated with tokenizing assets on public blockchains, Morin believes that many firms will still be influenced by BlackRock’s choices.

Morin also highlighted that Franklin Templeton, another traditional financial institution, had already taken the proactive step of launching a tokenized money market fund on the Ethereum layer-2 network, Polygon, in October of the previous year. This fund, called Franklin OnChain U.S. Government Money Fund (FOBXX), currently holds $360.2 million in U.S. Treasurys. In total, $1.08 billion worth of U.S. Treasurys have been tokenized across 17 products.

Morin expressed doubt regarding the approval of spot Ether exchange-traded funds (ETFs) in May. Based on her experience working with Grayscale’s Bitcoin ETF, she argued that the lack of communication between the United States Securities and Exchange Commission and prospective fund issuers indicated a slim chance of approval by the May 23rd deadline set by VanEck. This sentiment aligns with Eric Balchunas, a senior Bloomberg ETF analyst, who believes that the chances of approval decrease with each day the SEC refrains from engaging in public comment.