BlackRock looking to tokenize ETF shares to expand its digital asset infrastructure

Core Insights - BlackRock is exploring the tokenization of exchange-traded fund (ETF) shares to expand its digital asset infrastructure beyond traditional markets [1][2] - The initiative is part of a broader strategy that includes a $2.2 billion tokenized money-market fund launched in March 2024 and follows the introduction of its Bitcoin ETF [2][3] - CEO Larry Fink has emphasized that all financial assets can be tokenized, which would allow for trading outside standard hours and improve international access to US products [3] Regulatory and Market Context - BlackRock has tested tokenized fund shares using JPMorgan's Kinexys infrastructure, positioning itself as an early adopter of digital settlement models [4] - The tokenized money-market funds, excluding private credit, represent the largest category of real-world assets (RWA) with a market cap of $7.4 billion as of September 11 [4] - The evolution of regulatory frameworks is crucial as exchanges like Nasdaq are also moving towards trading tokenized stocks and ETFs [3][4] Challenges and Opportunities - Current challenges include reconciling ETF settlement through traditional Wall Street clearinghouses with the instant trading capabilities of blockchain [6] - The exploration of tokenized ETFs reflects a broader evaluation of blockchain technology in mainstream finance, aiming to enhance market infrastructure and improve collateral flows [7] - The combination of BlackRock's digital asset advocacy and regulatory shifts positions tokenized ETFs as a bridge between traditional and decentralized finance systems [7]