The World’s Largest Asset Managers Embrace Tokenization

Tokenization has the potential to revolutionize asset management, with several large companies investigating blockchain’s ability to digitize various asset classes.

However, as digital asset management appears to be on the verge of mainstream adoption, the investment momentum in blockchain development appears to be waning.

Franklin Templeton’s bold foray into digital funds

Tokenization involves issuing digital tokens to represent various assets. Using blockchain technology, assets such as securities, real estate and works of art can be digitized, providing a smoother and more transparent trading environment.

Franklin Templeton was a pioneer in this area. After successfully launching the Franklin OnChain US Government Money Fund (FOBXX) on the Stellar blockchain, they expanded their operations to the Polygon network.

Tokenization of blockchain use cases
Blockchain use cases. Source: Statista

Currently, the cumulative value of tokenized US money market funds is an impressive $660 million, with FOBXX taking the lion’s share with a market capitalization of $294 million. However, the competition is intensifying.

WisdomTree: a new competitor on the horizon

Aiming to carve out a niche in asset tokenization, WisdomTree unveiled several digital funds through its WisdomTree Prime platform this year.

Leveraging Stellar and Ethereum blockchains, WisdomTree has offered alternatives to Franklin Templeton’s offerings and introduced index funds that track major US companies.

During an earnings call, Jonathan Steinberg, CEO of WisdomTree, recently highlighted the company’s tokenization efforts, emphasizing WisdomTree’s advantage as an early bird in this space.

Imminent entry of BlackRock into digital asset management

BlackRock, the global asset management giant, may soon be dipping its toes in the waters of tokenization.

Larry Fink, CEO of BlackRock, has consistently highlighted the transformative potential of blockchain. He highlighted his promise to improve market efficiency and profitability for investors.

BlackRock has not officially declared any tokenization strategy. However, the company has partnered with Jio Financial Services to design a “digital-first” asset management platform for India.

He also applied for a Bitcoin ETF with the United States Securities and Exchange Commission, hinting at an upcoming digital transition.

A paradox: reduction of risk capital in the blockchain

Surprisingly, venture capital (VC) funding in the crypto sector appears to be cooling even as asset management prepares for blockchain.

Sequoia Capital recently cut its crypto venture fund from $585 million to just $200 million and simultaneously cut its crypto ecosystem fund in half.

Data from RootData reveals a marked decline in venture capital funding for crypto startups over the past year. From a peak of $12.6 billion in the first quarter of 2022, venture capital investments fell to just $2.14 billion in the second quarter of 2023.

Venture capital investment in crypto companies
Venture capital investment in crypto companies. Source: RootData

The significant drop is across all blockchain-centric companies, from DeFi and GameFi to NFTs and infrastructure.

The Ripple Effect: Crypto Exchanges Are Suffering

The funding freeze has particularly affected crypto exchanges. For example, Bitkub’s valuation in Thailand fell from a high of nearly $1 billion to $184 million.

Many analysts link Sequoia’s pullback to its holdings in the now defunct crypto exchange FTX. The fallout from FTX’s fall continues to deter investors, casting a shadow over the future of the industry.

Asset Manager Tokenization: Crypto Fundraising by Sector
Crypto fundraising by sector. Source RootData

While tokenization presents a promising future for asset management, the broader blockchain and crypto sectors are facing challenges, particularly around investments and valuations.


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