Last week Fidelity Investments filed an SEC registration showing plans to launch a tokenized Treasury fund, the Fidelity Treasury Digital Fund. It follows the growing volume of tokenized Treasuries, with the total market capitalization now heading towards $5 billion, although there’s some double counting because some of the funds are backed by others on the list.
BlackRock’s BUIDL leads the market with $1.4 billion in market capitalization, with Ethena Labs’ USDtb stablecoin using over $1 billion of that total for its reserves. Similarly, Hashnote’s USYC, the second-ranked tokenized treasury, counts the Usual stablecoin as the biggest investor, comprising 95% of its tokens.
If we’re not mistaken, Fidelity is already soliciting business from tokenization asset managers such as Ondo Finance. For example, the assets of Ondo’s OUSG fund primarily comprise other tokenized funds such as BUIDL, Franklin Templeton’s FOBXX, and WisdomTree’s WTGXX. However, they also have $75 million in a Fidelity fund which looks like it probably isn’t tokenized, and was first invested in mid- February.
The SEC registration statement states that initially the Ethereum blockchain will be used for transactions but the primary records of ownership will be conventional and will be reconciled with the blockchain daily.
However, it says in the future the blockchain could become the authoritative ledger. Additionally, in the initial stages the fund tokens can only be held via the Fidelity wallet. However, it’s possible that might be relaxed and the fund tokens may be available for secondary trading in the future.
These sorts of limits are typical in the early stages, and are like asset manager training wheels. It’s surprising Fidelity has taken this long to tokenize a fund, because it was amongst the first asset managers to engage with cryptocurrencies and blockchain. Sister company Fidelity International has leaned more into tokenization.
