Tokenized Funds Gain Traction in Institutional Finance

Tokenized short-term funds are emerging as a disruptive force in institutional liquidity management, with $5.7 billion in assets accumulated since 2021. These blockchain-based products—backed by U.S. Treasurys and other low-risk assets—offer fractional ownership and real-time settlement, addressing pain points in traditional money markets.

BlackRock dominates the nascent sector with its $2.5 billion digital liquidity fund, while Franklin Templeton, Circle, and others manage hundreds of millions. European players like Germany's Midas are entering the fray with zero-minimum investment products, as Robinhood expands overseas while pushing for U.S. regulatory clarity.

Though dwarfed by the $7 trillion conventional money market industry, adoption accelerates for yield optimization, insurance liquidity, and DeFi collateral use cases. Moody's warns of unaddressed risks even as institutional demand grows.