But Slavin said firms appear reluctant to wait. “Even though the regulations and the rails aren’t fully ready yet, they want to get products out,” he said.
Wall Street believes that blockchain networks could eventually become a new distribution channel for traditional investment products. Tokenized funds could allow investors to hold and transfer fund shares around the clock, potentially reducing settlement times and expanding access to global investors.
One concern emerging for fund issuers, according to Slavin, is that tokenized versions of well-known ETFs are already trading on platforms outside traditional financial markets, often without direct involvement from the fund sponsors themselves.
“There are ETFs, like hundreds of them, that are trading in unregulated markets around the world,” he said.
Because anyone can theoretically create a tokenized representation of a publicly traded fund, issuers face the prospect of products bearing their names circulating beyond their oversight.
“It’s opaque,” he said. “It effectively creates a reputation risk, even though it’s not at all affiliated, frankly, with the asset manager.”
That 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 is evolving faster than the rules governing it.