In a significant move that underscores the growing convergence between traditional finance and blockchain innovation, Fidelity Investments has filed with the U.S. Securities and Exchange Commission (SEC) to launch an Ethereum-based, on-chain share class of its Fidelity Treasury Digital Fund (FYHXX). This development marks another milestone in the institutional adoption of blockchain technology and positions Fidelity at the forefront of the tokenization of real-world assets (RWA).
The fund, originally launched in late 2024, primarily invests in cash and U.S. Treasury securities—making it a low-risk, high-liquidity vehicle ideal for institutional investors seeking stable returns. The newly proposed on-chain version will maintain the same underlying assets but introduce a digital, blockchain-native ownership layer.
On-Chain Ownership and Regulatory Transparency
According to the SEC filing, the on-chain share class will be recorded both in traditional book-entry form by the fund’s transfer agent and simultaneously on a public blockchain—initially Ethereum. This dual-record system ensures regulatory compliance while enabling transparency and auditability through decentralized ledger technology.
While Ethereum is the designated network at launch, the filing notes that Fidelity reserves the right to migrate or expand to other public blockchains in the future, reflecting a flexible and forward-looking approach to infrastructure.
The effective date for the new share class is set for May 30, 2025, pending final regulatory approval. This cautious, compliance-first strategy highlights Fidelity’s commitment to working within existing financial frameworks while pushing technological boundaries.
Industry Momentum: The Rise of Tokenized U.S. Treasuries
Fidelity is not alone in this space. The tokenization of government-backed securities has gained rapid momentum, with major asset managers launching similar products:
- BlackRock introduced the USD Institutional Digital Liquidity Fund (BUIDL) in March 2024, a tokenized fund holding cash and U.S. Treasury bills on Ethereum.
- Franklin Templeton offers the Franklin OnChain U.S. Government Money Fund (FOBXX), another blockchain-based money market product.
These developments signal a broader industry shift toward digitizing high-quality, income-generating assets. By leveraging blockchain, firms aim to improve settlement speed, reduce counterparty risk, and enable 24/7 market access—capabilities absent in traditional financial systems.
Cynthia Lo Bessette, head of Fidelity Digital Asset Management, emphasized the transformative potential:
“Fidelity Investments has long been an innovator and adopter of new technologies that improve customer experiences and outcomes. Aligned with this heritage, we see promise in tokenization and its ability to be transformative to the financial services industry by driving transactional efficiencies with access, and allocation, of capital across markets.”
Real-World Applications of Tokenization
One of the most compelling use cases for tokenized funds lies in collateral management. As Lo Bessette noted, using tokenized assets as non-cash collateral could streamline margin requirements across trading desks and clearinghouses.
Imagine a global derivatives trader posting tokenized Treasury shares as collateral in real time—without relying on slow, manual reconciliation processes. This would enhance capital efficiency, reduce idle balances, and unlock liquidity across markets.
McKinsey & Company projected in a 2024 report that the total market capitalization of tokenized real-world assets could reach $2 trillion by 2030. With U.S. Treasuries forming a core component of this ecosystem, the foundation for scalable digital finance is being laid today.
Fidelity’s Strategic Vision for Blockchain
Matt Apkarian, associate director of product development at Cerulli Associates, praised Fidelity’s measured yet ambitious approach:
“Funds with recordkeeping running side-by-side with traditional transfer agency serve as a proof of concept and testing ground that can set the stage for greater future adoption of blockchain technology.”
By maintaining parallel systems—one traditional, one blockchain-based—Fidelity mitigates operational risk while gathering data on performance, scalability, and user behavior. This hybrid model could become a blueprint for other institutions navigating digital transformation.
Apkarian also stressed the importance of stablecoin infrastructure in supporting tokenized asset ecosystems:
“While this isn't exactly a stablecoin, it serves a similar purpose in a cash-like instrument that is reconcilable on a blockchain and a step in the right direction for getting the traditional finance and decentralized finance systems working together.”
Though not a stablecoin itself, the on-chain fund functions as a regulated, yield-bearing digital dollar equivalent—bridging DeFi efficiency with TradFi compliance.
Institutional Focus and Scalability Challenges
The on-chain share class carries a minimum investment of $1 million, clearly targeting institutional clients rather than retail investors. This aligns with current blockchain limitations: while secure and transparent, public networks like Ethereum are not yet optimized for high-frequency, low-value transactions typical in retail fund flows.
Apkarian acknowledged this reality:
“The technology can be slow relative to our current traditional infrastructure, so we are far from a potential future of major financial market systems operating on blockchain technology. However, the industry sees strong applications of the technology with significant advantages in some use cases.”
Indeed, institutional use cases—such as interbank settlements, cross-border payments, and wholesale funding—stand to benefit most from tokenization due to their lower transaction volume and higher value per trade.
Frequently Asked Questions (FAQ)
Q: What is a tokenized money market fund?
A: It’s a digital version of a traditional money market fund where ownership shares are issued and recorded on a blockchain. Investors hold tokens representing their stake in a portfolio of short-term, high-quality assets like U.S. Treasuries.
Q: Is Fidelity’s tokenized fund available to retail investors?
A: No. With a $1 million minimum investment, it is designed exclusively for institutional clients such as banks, asset managers, and corporate treasuries.
Q: How does blockchain improve money market funds?
A: Blockchain enables faster settlement (potentially instant), 24/7 availability, reduced operational costs, enhanced transparency, and programmable features like automated distributions or collateral posting.
Q: Can the fund switch from Ethereum to another blockchain?
A: Yes. While currently based on Ethereum, Fidelity’s filing allows for future use of other public blockchains, ensuring flexibility as technology evolves.
Q: Does this mean Fidelity is launching a cryptocurrency?
A: No. The fund does not invest in cryptoassets. Instead, it uses blockchain as a recordkeeping tool for traditional financial instruments.
Q: When will the tokenized fund launch?
A: The effective date is May 30, 2025, subject to SEC approval.
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Conclusion
Fidelity’s move to tokenize its Treasury money market fund reflects a maturing ecosystem where blockchain is no longer speculative—it’s operational. With support from industry leaders like BlackRock and Franklin Templeton, and backed by credible research from firms like McKinsey, tokenized real-world assets are transitioning from concept to mainstream finance.
While scalability and speed remain challenges for widespread adoption, early institutional use cases demonstrate clear value. As infrastructure improves and regulatory clarity increases, we may soon see tokenization extend beyond Treasuries to corporate bonds, equities, real estate, and more.
For now, Fidelity’s filing is more than a product launch—it’s a signal that the future of finance is being written on-chain.