Fidelity files for Ethereum-based US Treasury fund ‘OnChain’
Fidelity Investments has taken a significant step into the blockchain arena by filing to register a tokenized version of its US dollar money market fund on Ethereum, a development that positions the firm alongside major players like BlackRock and Franklin Templeton in the growing sector of asset tokenization. The announcement, made on March 21, 2023, to the US securities regulator, details an initiative known as “OnChain,” aimed at enhancing transaction tracking capabilities for the Fidelity Treasury Digital Fund (FYHXX). This fund, valued at $80 million, is composed primarily of US Treasury bills.
Pending regulatory approval, Fidelity anticipates launching the OnChain solution on May 30. The introduction of this share class is intended to offer investors greater transparency and a verifiable means to track share transactions tied to the FYHXX fund. However, it is important to note that Fidelity will continue to maintain traditional book-entry records as the official ledger of ownership.
A key aspect of the OnChain initiative is the daily reconciliation of transactions recorded on the blockchain with Fidelity’s official records, assuring investors of the accuracy and reliability of the data presented on the blockchain. Despite this technological advancement, Fidelity has clarified that the US Treasury bills themselves will not be directly tokenized, maintaining a degree of traditional asset management within their operations.
As this $5.8 trillion asset manager embraces blockchain technology, there are discussions about the potential for future expansion of the OnChain platform to encompass other blockchain networks. Fidelity’s movement into this space signifies a broader trend among asset managers who are increasingly seeking to tokenize various financial instruments on blockchain platforms — a shift that includes Treasury bills, bonds, and private credit offerings.
The Real World Asset (RWA) tokenization market, which encompasses a variety of Treasury products, has seen significant growth, currently valued at approximately $4.78 billion. The market is notably led by BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), which accounts for around $1.46 billion of that total.
Currently, over $3.3 billion in RWAs has been tokenized on the Ethereum network, solidifying its position as a favored platform for financial institutions delving into blockchain technologies. Stellar follows with a tokenization figure of approximately $465.6 million. The preference for Ethereum among traditional finance (TradFi) firms is echoed by BlackRock’s head of crypto, Robbie Mitchnick, who highlighted the network’s decentralized nature, credibility, and security as pivotal factors in its widespread adoption for asset tokenization.
Mitchnick’s commentary underscores a broader sentiment in the finance industry: clients are increasingly valuing these attributes in their choices, further solidifying Ethereum’s role as a pivotal player in the blockchain ecosystem. As Fidelity and its contemporaries continue to navigate this evolving landscape, the implications for the future of asset management and transaction processing through blockchain remain substantial.
