Fidelity Investments is making a major push into the world of asset tokenization by converting its U.S. dollar money market fund into a blockchain-based version. The company recently introduced plans to tokenize its Fidelity Treasury Digital Fund (FYHXX), which holds U.S. Treasury bills. By leveraging blockchain technology, Fidelity aims to enhance the efficiency of transactions and tap into the growing market for tokenized assets. The fund’s tokenized version is awaiting regulatory approval and is expected to be available by May 30.

The FYHXX fund, which was introduced late last year, currently holds $80 million in U.S. Treasury bills. The OnChain class of the fund operates on the Ethereum blockchain, with plans for future expansion to other blockchain networks. The decision to tokenize the fund highlights a broader trend in the financial sector, where an increasing number of banks and asset managers are exploring blockchain to tokenize traditional financial assets, such as government bonds and investment funds. This process, known as real-world asset tokenization, offers several advantages, such as faster transaction speeds, lower operational costs, and the ability to settle payments at any time, including outside of traditional banking hours.

Fidelity’s move places the firm among other significant financial institutions entering the tokenized U.S. Treasury market. BlackRock, for example, partnered with Securitize in March to create the BUIDL tokenized T-bill fund, which has quickly grown to $1.5 billion in assets. Similarly, Franklin Templeton introduced its blockchain-based money market fund in 2021, which now holds $689 million. These developments reflect the increasing popularity of tokenization as an innovative solution for streamlining financial operations.

Ethereum has emerged as the dominant blockchain for financial institutions looking to tokenize assets. As of now, over $3.3 billion worth of real-world assets have been tokenized on Ethereum. The Stellar network, in comparison, holds $465.6 million in tokenized assets. The head of crypto at BlackRock, Robbie Mitchnick, recently noted that Ethereum is the most natural choice for traditional finance firms exploring blockchain technology, citing its security and scalability.

The tokenized U.S. Treasury market, which was valued at $4.77 billion, has seen an explosive growth rate of 500% over the past year. This surge highlights the growing interest from traditional financial players in utilizing blockchain to tokenize assets and improve market efficiency. With regulatory clarity becoming more apparent, many institutions are seeking ways to integrate blockchain technology into their existing financial products.

Fidelity is not only focused on tokenization but is also a leader in cryptocurrency investment products. The firm offers two popular exchange-traded funds (ETFs) in the U.S.: the Fidelity Bitcoin ETF (FBTC), valued at $16.5 billion, and the Fidelity Ether ETF (FETH), which holds $780 million in assets. These offerings further demonstrate Fidelity’s commitment to advancing its crypto strategy and increasing access to digital assets for institutional investors.

For years, regulatory uncertainty hindered the growth of tokenized securities, with banks reluctant to engage with crypto-related assets. However, the U.S. government’s recent shift towards pro-crypto policies has helped overcome these barriers. The introduction of BlackRock’s BUIDL fund was a pivotal moment that encouraged more companies to enter the tokenization space.

Other major financial firms, including Visa, Mastercard, and Tether, are also embracing tokenization. Visa has developed a platform that enables banks to issue tokenized assets, while Tether has introduced its own tokenization platform. Mastercard is actively exploring blockchain technology to facilitate business payments.

Experts predict that the tokenized asset market could reach $600 billion by 2030, according to a report from Boston Consulting Group. In addition, the Commodity Futures Trading Commission (CFTC) is examining how tokenized assets could be utilized as collateral in future trades. Fidelity’s move to tokenize its Treasury fund is a significant step in the growing shift towards blockchain-based finance, highlighting the increasing importance of tokenized assets in the global asset management industry.