Ethereum Leads Wall Street Tokenization Race as Mass Adoption Looms

Key Takeaways

• As Wall Street embraces tokenization, institutions are converging around Ethereum.

• Some of the largest tokenized assets today include money market funds issued on Ethereum.

• With mass adoption looming, today’s infrastructure choices could set the standard for tomorrow’s on-chain markets.

When JPMorgan launched a new tokenized money market fund this week, it followed BlackRock and Fidelity in selecting Ethereum as its blockchain rail of choice.

Now, with Wall Street poised to expand the concept to other classes of securities, the OG smart contract platform is leading the tokenization race.

Between BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), Fidelity’s Treasury Digital Fund (FYHXX), and now, JPMorgan’s OnChain Net Yield Fund (MONY), some of the biggest names in asset management have launched tokenized MMFs on Ethereum.

The largest funds operated by BlackRock, Fidelity, and JPMorgan hold assets worth more than $1 trillion each, while the overall market for U.S. MMFs is worth more than $7.5 trillion.

That all three firms have converged on Ethereum is significant. Rather than opting for private blockchains or newer, faster networks, these institutions have chosen a platform known for its decentralization, deep developer ecosystem, and regulatory familiarity.

A strong network effect reinforces the preference for Ethereum, which already hosts the majority of tokenized U.S. Treasury products and regulated stablecoins.

This provides a ready-made infrastructure for asset managers seeking the most liquid and compliant venue for their on-chain offerings.

Although Ethereum is favored by the world’s largest asset managers, it would be unwise to rule out alternative blockchains.

Thanks to Figure Technologies’ home equity lending product, Provenance accounts for around 74% of the market for on-chain private credit.

Meanwhile, a single 100 million euro issuance on Polygon outweighs the combined value of all corporate bonds on Ethereum.

Against this backdrop, many of the companies building tokenization solutions have opted to remain blockchain-agnostic.

“We’re seeing a lot of interest in the private networks from the big banks. But I think outside of that, there is still a massive push towards public [blockchains],” observed Ctrl Alt CEO Matt Ong.

In an interview with CCN, Ong noted that this approach is playing out across the market.

For Instance, while JPMorgan issued MONY on Ethereum, the bank has deployed other tokenized assets on its own Kynexis platform.

While early tokenization initiatives have focused on a limited set of use cases, other asset classes may soon follow.

The holy grail of tokenization is arguably native, on-chain stock issuance, and huge swathes of the global stock market could potentially be up for grabs.

To that end, the Securities and Exchange Commission (SEC) recently granted approval for the Depositary Trust and Clearing Company (DTCC) to pilot a general-purpose framework for securities tokenization.

In doing so, the SEC essentially tasked the DTCC with establishing standards for issuing and settling securities on-chain.

With exchange operators like Nasdaq primed to list tokenized stocks as soon as possible, DTCC standards are expected to shape which blockchains are integrated into America’s core market infrastructure.

Meanwhile, Euroclear, which serves as the centralized securities depository for European markets, is involved in equivalent projects across the pond, such as the U.K.’s digital securities sandbox.

As Ong pointed out, Euroclear and the DTCC “have a massive advantage in the fact that they basically have a monopoly in the space.” However, “the key is going to be speed.”

“We’re already seeing others that are bringing digital securities depositories to life,” Ong noted, adding that if incumbent infrastructure giants don’t move quickly enough, they risk losing market share to new players that can bring assets on-chain much faster.

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