But Slavin said businesses are reluctant to wait. “They want to get the product out there even though the regulations and the rails aren’t quite ready yet,” he said.
Wall Street believes blockchain networks could eventually become a new distribution channel for traditional investment products. Tokenized funds allow investors to hold and transfer fund shares around the clock, potentially reducing settlement times and increasing access to global investors.
One concern emerging for fund issuers, Slavin said, is that tokenized versions of well-known ETFs are already being traded on platforms outside of traditional financial markets, often without direct involvement from the fund sponsors themselves.
“There are hundreds of ETFs as well that trade in unregulated markets around the world,” he said.
Since anyone can theoretically create a tokenized representation of an exchange-traded fund, issuers face the possibility that products bearing their names may circulate beyond their control.
“It’s opaque,” he said. “Frankly, it effectively creates a reputational risk, even though it has nothing to do with the asset manager.”
This dynamic is becoming a topic of discussion for BNY’s wealth management clients as they evaluate their own tokenization strategies. Just like in the early days of Bitcoin and crypto trading, the technology is evolving faster than the rules that govern it.
