TradFi firms now prefer public blockchains for tokenization

Traditional financial institutions are more keen on tokenizing assets on public blockchains than ever before, says a former Grayscale executive.

Speaking with Cointelegraph, Celisa Morin, who served as Vice President of Platform Distribution at Grayscale until mid-2023, said that a new BlackRock-led narrative among TradFi institutions could see more firms look to tokenize assets on public chains over private ones.

“I think we see a preference for private chains with JPMorgan’s Onyx. But I do think that this was the narrative a few years back. Now, I think it’s very much the public blockchains.”

Morin is now the head of international law firm Reed Smith’s crypto department, explaining it would make sense for larger traditional financial institutions to follow the lead of BlackRock — which launched its $100 million tokenized ‘BUIDL’ fund on the Ethereum network on March 18.

The BUIDL fund now holds $288 million in assets per Dune Analytics data.

BlackRock’s move to launch a fund on Ethereum wasn’t without controversy, with the asset manager’s on-chain wallet quickly becoming the target of various spoofs from crypto enthusiasts.

Deposits to BlackRock’s public wallet included legally dubious transactions from the now OFAC-sanctioned mixer Tornado Cash, as well as a roster of various cryptocurrencies from real-world asset (RWA) tokenization projects and memecoins.

Despite the potential legal troubles that come with opting to tokenize assets on public blockchains — instead of using a more KYC and AML-friendly private network, Morin said many firms would likely take the lead from BlackRock.

“If BlackRock has made these choices, I don’t know why the rest of the crew would be held back.”

Morin also noted that Franklin Templeton had already made the “forward thinking” move to launch its tokenized money market fund on the Ethereum layer-2 network Polygon in October last year.

Related: Over $1B in US Treasurys have now been tokenized on-chain

Franklin Templeton’s 11-month-old Franklin OnChain U.S. Government Money Fund (FOBXX) now boasts a total of $360.2 million in U.S. Treasurys. In total, $1.08 billion in U.S. Treasurys have now been tokenized across 17 products.

Ethereum ETF in May unlikely

Morin was less enthusiastic about spot Ether (ETH) exchange-traded funds (ETFs), saying it is unlikely they would be approved in May.

Having previously worked with the legal team in the lead-up to Grayscale launching its Bitcoin ETF, Morin agreed with recent sentiment that the lack of communication between the United States Securities and Exchange Commission between prospective fund issuers was a bad sign.

Echoing the sentiments of Senior Bloomberg ETF analyst Eric Balchunas — Morin said the chances of an approval by VanEck’s deadline on May 23rd grew slimmer with each day the SEC refrained from engaging in public comment.

Magazine: Bitcoin ETFs make Coinbase a ‘honeypot’ for hackers and governments — Trezor CEO