But Slavin said businesses seem reluctant to wait. “Even though the regulations and the rails aren’t quite ready yet, they want to bring products to market,” he said.
Wall Street believes that blockchain networks could ultimately become a new distribution channel for traditional investment products. Tokenized funds could allow investors to hold and transfer fund shares 24 hours a day, which could reduce settlement times and expand access to global investors.
According to Slavin, an emerging concern for fund issuers is that tokenized versions of well-known ETFs are already trading on platforms outside of traditional financial markets, often without the direct participation of the fund sponsors themselves.
“There are ETFs, like hundreds of them, that trade on unregulated markets around the world,” he said.
Since anyone can theoretically create a tokenized representation of an exchange-traded fund, issuers face the prospect of having products bearing their name circulate beyond their oversight.
“It’s opaque,” he said. “It does create reputational risk, even though, frankly, it’s not related to the asset manager at all.”
This dynamic has become a growing topic of discussion among BNY’s asset management clients as they evaluate their own tokenization strategies. Similar to the early days of Bitcoin and crypto trading, the technology evolves faster than the rules that govern it.
