Tokenized funds just hit $14.4 billion in assets under management. That’s an all-time high. A year ago, this number was barely $2 billion.
BlackRock’s BUIDL fund alone crossed $2.9 billion in AUM, growing from zero to over $1 billion in just its first year. Tokenized U.S. Treasuries crossed $7.3 billion in 2025, which is a 256% year-over-year increase. JPMorgan launched its first tokenized money market fund on Ethereum in December 2025. Franklin Templeton operates tokenized funds across six different blockchains. Hamilton Lane has made eight feeder funds available through tokens since 2022. These are the world’s largest financial institutions, the guardians of institutional wealth, and they’re betting heavily on tokenized funds.
As per BCG estimates, tokenized fund AUM could reach $600 billion by 2030. Even this could touch trillions if existing mutual funds and ETFs are converted to tokenized formats. BCG called this the third revolution in asset management, following the mutual fund and ETF era that changed investing in the 20th century.
So, in this article, we will examine whether tokenized funds are poised to become the next obsession of big money, explore their mechanics, the benefits driving institutional adoption, and the challenges that remain before tokenization becomes ubiquitous.
What Exactly Is Fund Tokenization?
Fund tokenization is simple in concept. You represent fund shares as digital tokens on a blockchain. Instead of a transfer agent maintaining records in a centralized database, the blockchain becomes the official registry.
Each token equals a share. When you buy, the smart contract mints tokens. When you redeem, it burns them. Ownership transfers happen instantly, 24/7, without intermediaries.
Stefan Brinaru from BNP Paribas puts it well: “Tokenization is simply the latest stage in the digitization of securities. The tokens are held and traded through a digital ledger with all the security and efficiency that implies.”
Here’s how it works at the technical level:
There are two ways to tokenize:
- Hybrid model: This is what most institutions use today. You create a digital wrapper around an existing fund. The underlying assets, custody, and compliance stay the same. Only the share registry moves to blockchain. This is quick to implement, and has minimal regulatory friction.
- Fully on-chain model: This is the future. The entire fund, which includes assets, transactions, governance, and reporting, lives on blockchain. This gives maximum efficiency, maximum transparency. But also more complex to build and regulate.
Most institutions start with a hybrid model. They get the distribution benefits and market access without rebuilding their entire infrastructure at the very start.
Why Big Money Is Paying Attention?
Tokenized funds solve several institutional problems simultaneously.
1. Instant Settlement
Traditional fund settlement takes two days. That’s T+2. The US just moved to T+1, which helped in cutting down the margin needs and improved efficiency. But tokenized funds can settle instantly at T+0. This is because of atomic settlement.
Here’s one Money Market Fund example from Franklin Templeton showing traditional vs tokenized fund operations:
Why does this matter? Because every day your capital is stuck in settlement, you’re losing money. Counterparty risk increases. Cash buffers sit idle. Instant settlement will reduce counterparty risk and improve capital efficiency through intraday liquidity for short-term borrowing and enhanced collateral usage.
Institutional investors who manage vast portfolios, even marginal improvements in settlement speed can deliver significant capital efficiency gains.
This efficiency increase directly impacts economic velocity. In the words of Citizens Bank:
“Money circulates faster through economies when transactions settle rapidly.”
2. 24/7 Global Access
On Jan 19, the New York Stock Exchange announced its developing a platform for 24/7 trading of tokenized stocks and ETFs.
Unlike traditional markets, which are constrained by exchange hours, tokenized funds can operate continuously. Because blockchains are always operative.
Take Franklin Templeton, for example. Their Benji platform allows continuous onboarding, transfers, and settlement across time zones. This is an important change for an industry where, for example, Asian investors have long watched American markets move while unable to trade. Or vice versa for any global market.
And Tokenized funds recognize this needs of the new generation of investors who wants to use their wallets to trade markets on a 24/7 basis.
3. The Collateral Challenge
This is the big one. There are $255 trillion in marketable securities globally. Only $28.6 trillion are actively used as collateral. The rest sits locked up.
In December 2025, the CFTC issued guidance allowing tokenized money market funds as eligible collateral for derivatives trading. This is a watershed moment.
If tokenized MMFs become approved margin collateral for cleared derivatives and repos, they transform from “cash parking” to “core institutional infrastructure.” That’s the same category that fuels trillions in daily financing.
JPMorgan’s Tokenized Collateral Network already enables transfer of tokenized MMF shares as collateral. BlackRock’s BUIDL is accepted on major crypto exchanges as collateral for derivatives trading.
4. Fractional Access and Lower Minimums
Hamilton Lane used to require $5 million minimums for private equity. Their tokenized feeder funds need as low as $500.
This opens entirely new investor segments. Retail investors can access asset classes previously reserved for institutions solely. International investors can participate without complex cross-border arrangements.
To quote, Victor Jung from Hamilton Lane, their goal is to:
“…alleviate some of the barriers to entry for investors looking to access the historically strong returns that private markets can offer by providing more transparency, seamless operations and a solution that we believe is cheaper, better and faster.”
Different Types of Fund Tokenization
The technology applies across different fund types. Here’s what’s happening in each category.
1. Money Market Funds
These were the gateway product and fund tokenization started with it.
Because it solves a simple problem: We have on-chain dollars. Where do we park them to earn yield without taking wild risk?
Money market funds are stable, liquid, and yield-bearing. They maintain a $1 NAV. They invest in low-risk, short-term instruments like Treasury bills. Tokenizing them is relatively easier because the assets are already highly standardized and structurally compatible with on-chain cash management.
Take JPMorgan’s MONY as the latest example. This was launched in December 2025 and this is the first GSIB tokenized MMF on public blockchain. This was seeded with $100M of their own capital.
Source: JP Morgan
Let’s take another example of a private-permissioned blockchain MMF initiative by Goldman Sachs & BNY.
Their blockchain is built on Canton using the Daml smart contract language. This setup is designed for privacy. While BlackRock’s trades are visible on Etherscan, Goldman’s trades are private. This allows banks to move huge sums without tipping off the market.
A Few Other Key Implementations:
- BlackRock BUIDL: $2.9B AUM, operates on Ethereum, launched March 2024
- Franklin Templeton FOBXX: First SEC-registered fund on blockchain (2021), now on 6 chains
- UBS uMINT: Built on Ethereum and Polygon for institutional liquidity
2. Private Equity & Private Credit Funds
These benefit most from tokenization. Traditional PE has 7-10 year lock-ups, high minimums, and no secondary market. Tokenization addresses all three problems.
J.P. Morgan’s Kinexys Fund Flow could be a great example here. They tokenized a private equity fund for its wealth clients recently.
This Fund Flow solution automates ‘Capital Calls.’ Usually, PE funds require investors to wire money manually when a new deal happens. In J.P. Morgan’s setup, a smart contract automatically pulls the funds from the investor’s tokenized deposit account.
It uses the bank’s permissioned Kinexys blockchain. This is the same platform that powers their blockchain-based bank accounts.
Let’s take another example of Apollo ACRED. This feeder fund invests in its Apollo Diversified Credit Fund. The goal is to generate a return comprised of both current income and capital appreciation. So there is current income with low volatility and low correlation to the broader markets.
A few other Key implementations:
- KKR Health Care Strategic Growth Fund II: First major PE fund tokenized (2022), on Avalanche via Securitize
- Hamilton Lane (8 feeder funds): Minimums reduced from millions to $500, on Polygon
- Brevan Howard Master Fund: Hedge fund tokenization on Aptos
3. Real Estate Funds
Real estate is traditionally illiquid with high entry barriers. Tokenization creates secondary markets for fund shares and enables fractional ownership.
Deloitte projects $4 trillion in tokenized real estate by 2035. EY surveys show 49% of HNW investors and 56% of institutional investors rank real estate among top tokenized asset preferences.
In Singapore, managers are using tokenized Variable Capital Companies (VCC) structures to manage multiple sub-funds under one legal entity. This is significantly cutting costs for real estate portfolios.
4. Multi-Asset & Index Funds
Deutsche Bank’s DAMA 2 Platform (Digital Asset Management Access) is the best example of institutional multi-asset tokenization.
Developed with Memento Blockchain, this Ethereum Layer-2-based platform, built with ZKsync, enables banks to issue and manage tokenized funds across equity, fixed income, and alternative strategies.
Their architecture has permissioned blockchain elements (ZKsync Prividium) with institutional-grade custody. This ensures regulatory compliance and enables 24/7 trading. DAMA 2 uses soulbound tokens (SBTs) for investor identity verification, automated compliance checks, and seamless fiat-to-token conversion through integrated payment providers.
The platform supports various fund structures, including UCITS-equivalent tokenized funds for European markets.
5. Hedge Funds & Alternative Strategies
Alternative investment managers are using tokenization to create novel structures for complex strategies. For example, in areas like crypto hedging and quantitative trading.
Theo’s thGOLD Yield-Bearing Gold Product is an advanced alternative strategy tokenization. Launched in January 2026, thGOLD tokenized gold that generates yield through secured lending to gold retailers. This transformed gold’s traditional commodity exposure into a yield-producing asset.
Built on the MG999 On-Chain Gold Fund managed by FundBridge Capital and powered by Standard Chartered’s Libeara platform, thGOLD provides exposure to LBMA gold prices and generates yield through secured lending arrangements.
The structure tells us how tokenization enables complex strategies previously impossible:
- gold collateralized lending at scale,
- automated yield distribution, and
- 24/7 trading of yield-bearing commodities.
Regulation, Compliance, and Where Institutions Must Start
The strongest signal in today’s fund tokenization market is not technological ambition just. It is regulatory pragmatism.
Almost every implementation today is built around existing fund law. Tokenization is layered on top of compliant vehicles. Investor qualification, custody, disclosures, reporting, and audit processes are central to every use case.
Where innovation occurs is in how these obligations are executed.
KYC and transfer restrictions can be embedded in smart contracts. Ownership registries can live on-chain. NAV data can be delivered programmatically. Distributions can be automated. Reconciliation can be reduced.
For institutions that are looking at fund tokenization, the starting point is not blockchains. It is structure.
Which fund vehicles are compatible? Which jurisdictions support tokenized securities? How will custody be handled? How will NAV be delivered on-chain? How will compliance be enforced at the token level? How will tokens interact with payments?
Only after these questions are answered does technology selection matter.
Download Checklist for Tokenized Funds
Choose Zeeve for Consultation and Compliant Infra
Launching a tokenized fund requires more than a good idea. You need institutional-grade blockchain infrastructure that handles compliance, scales under load, and operates 24/7 without downtime.
Zeeve provides exactly that for banks, fintechs, and AMCs.
Consultation and Strategy
Zeeve provides expert consultation to help firms choose the right network (Public, Private, or App-Chain), token standard, and design the legal-technical architecture for their fund. Zeeve’s team works with enterprises to design tokenization strategies aligned with business goals. This includes:
Enterprise-Grade Infrastructure
Zeeve’s platform supports the full infrastructure stack for fund tokenization. We manage the patches, updates, and monitoring so your team can focus on the fund’s performance.
Whether you need the privacy of ZKsync Prividiums, the performance of an Avalanche L1, or the liquidity of public Ethereum, Zeeve provides high-availability nodes for over 40+ protocols and custom blockchains with enterprise SLAs and 99.9% uptime guarantees.
Embed KYC/AML protocols, automated transfer restrictions, and immutable audit trails directly into your infrastructure. Our infrastructure is designed to meet the strict security and regulatory requirements of the financial sector (ISO 27001, SOC 2 Type II, GDPR, and HIPAA compliant).
For AMCs looking to launch quickly, Zeeve provides White-Label Solutions so you can focus on the fund management while we handle the underlying infra.
That’s what we have consistently delivered. Ask us. We will show you.
