Fidelity International and JPMorgan to Tokenize Money Market Funds

Fidelity International, one of the world’s leading investment management service providers, has joined JPMorgan’s Tokenized Collateral Network, according to a recent report on Monday. As part of the collaboration, Fidelity will tokenize money market shares on JPMorgan’s private blockchain network, Onyx Digital Assets.

As of June 3, Fidelity’s spot Bitcoin ETF takes up to 56% of Fidelity’s inflows, said Bloomberg ETF analyst Eric Balchunas. The biggest players in the world are going after BTC. With an ETH ETF coming, there will be more money flowing into tokens.

To those asking, $IBIT is 26% of BlackRock's flows and 56% of Fidelity's flows, so yes, def having impact on leaderboard.

— Eric Balchunas (@EricBalchunas) June 3, 2024

With its latest move, Fidelity aims to improve efficiency in collateral management, reduce transaction costs, operational risks, and enhance stability during market stress, the firm noted.

Blockchain Blows Up

Launched last year, JPMorgan’s Tokenized Collateral Network (TCN) designed to enable the tokenization of traditional financial assets into digital tokens. Tokenization allows for faster and more cost-effective collateral management.

TCN sits on the Onyx Digital Assets platform. Its role is to facilitate the transfer of tokenized assets between collateral receivers and providers on the Onyx blockchain. The network has been used in live transactions, including the tokenization of BlackRock shares for collateral in an OTC derivatives trade with Barclays.

JPMorgan’s TCN targets expanding its scope of assets beyond money market funds to include other asset classes like equities or fixed income in the future. According to the report, the collaboration is expected to give Fidelity numerous benefits, such as 24/7 collateral use and new opportunities in the collateral market.

“The ability to tokenize assets and use them under both title transfer and pledge structures, outside of any limiting market operating hours, has the potential to create new opportunities in the collateral market,” according to the report.

More Coming From Wall St.

The collaboration has also shown growing interest in blockchain technology by traditional financial institutions.

Other U.S. financial giants like Franklin Templeton and BlackRock are also exploring money market funds on blockchain platforms.

In 2021, Franklin Templeton debuted the Franklin OnChain U.S. Government Money Fund (FOBXX), becoming the first U.S. registered mutual fund to use a public blockchain to process transactions and record share ownership. As of June 10, the fund has $357.68 million in assets under management, according to Dune Analytics.

In March this year, BlackRock launched its first tokenized fund on Ethereum. The fund, called BlackRock USD Institutional Digital Liquidity Fund (BUIDL), invests in cash, US Treasuries and repurchase agreements. Holders receive a cryptocurrency token called BUIDL valued at $1.

BlackRock’s tokenized fund has $463.27 million in assets under management, leading the charge just a few months after its debut.

Major Player in US Bitcoin ETF Market

Before Fidelity piloted the tokenization of its own money market fund using Onyx Digital Assets, it had already launched its Bitcoin exchange-traded fund (ETF) in Europe. The fund trades under the ticker FBTC, similar to Fidelity’s spot Bitcoin fund. However, it’s important to note that these are separate products.

Fidelity’s spot Bitcoin ETF made a successful debut in the U.S. As of June 10, Fidelity WiseOrigin Bitcoin has over $12 billion in assets under management, per HODL15Capital’s data.

According to Bloomberg ETF analyst Eric Balchunas, the FBTC fund represented 56% of Fidelity’s ETF inflows as of June 3. Meanwhile, BlackRock’s spot Bitcoin ETF IBIT accounts for 26% of BlackRock’s total $65.1 billion in ETF inflows.

Vanguard, the asset management group, is not participating in the Bitcoin ETF race but is still the leading ETF issuer.

Vanguard has the largest inflows, with $102.8 billion in 2024, surpassing BlackRock’s $65.1 billion in inflows. Fidelity ranks 5th with $15.8 billion in inflows since the beginning of 2024.

Currently, BlackRock has 433 ETFs with total assets under management (AUM) of $2.8 trillion. Fidelity manages only $74 billion in assets from 70 ETFs.

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