Bank of America (BAC) has identified tokenization as the next seismic shift in investment products, labeling it “mutual fund 3.0,” according to a recent report. In a world where blockchain innovation is racing ahead, the bank believes tokenization could redefine traditional finance, much like mutual funds did in 1924 and ETFs did in the early 2000s. Analysts, led by Craig Siegenthaler, suggest this burgeoning trend is more than just a flicker of financial evolution—it’s a beacon guiding the future of asset management.
The Rise of Tokenized Assets
Tokenization is not just a buzzword; it represents a shift from traditional asset management to a more decentralized, blockchain-based approach. Real-world asset (RWA) tokenization has been gaining momentum. Companies like Securitize are paving the way by partnering with big players such as BlackRock, Apollo, KKR, and Hamilton Lane to launch tokenized funds. WisdomTree has even developed its own tokenization engine, offering over a dozen tokenized funds. This trend is further highlighted in our recent article on how tokenized RWAs are heating up.
RWA.xyz provides a glimpse into the scale of this trend, reporting that the value of real-world assets represented on-chain has surpassed $28 billion, primarily in private credit and Treasuries. Yet, despite its promise, tokenization faces regulatory hurdles. The GENIUS and Clarity Acts address stablecoins but leave tokenized funds in a regulatory gray area—creating friction for widespread adoption, especially among U.S. investors.
Challenges and Opportunities
While tokenization offers exciting prospects, it also raises significant challenges. The advent of commission-free trading of stocks and ETFs in the U.S., spurred by Robinhood’s disruption in 2019, has made tokenized equities less appealing. “The U.S. brokers have already shifted their focus to monetizing client cash and order flow,” Siegenthaler notes. This pivot has lessened the allure of tokenized equities, yet it’s a different story for money market funds.
Tokenized money market funds, supported by smart contracts, could revamp cash sweep economics and introduce fresh revenue models. Distribution, however, remains a challenge. Platforms for tokenized funds are scarce, but online brokers like Robinhood, Public, and eToro are well-positioned. Their robust crypto businesses and tech-savvy, self-custodial client bases make them likely contenders for driving tokenized fund adoption. Coinbase, with its expanding scope beyond pure crypto, could also become a key player. Additionally, the tokenized gold market is experiencing significant growth, showcasing the diverse applications of tokenization in different asset classes.
Looking Ahead
The path forward for tokenization is both promising and precarious. Bank of America predicts that tokenized money market funds may spearhead adoption due to their more attractive yields compared to stablecoins, which are restricted from paying interest under the Genius Act. Following closely might be private credit and high-yield offerings.
Yet, questions linger. Will regulatory frameworks catch up, or will they stifle innovation? Can traditional asset managers adapt quickly enough, or will they be left in the dust of more nimble crypto-native enterprises? The answers remain elusive, but one thing is clear: tokenization is poised to reshape the investment landscape, whether through the steady march of innovation or the unpredictable dance of market forces.
As the financial world stands on the brink of this next evolution, investors and regulators alike will need to navigate this brave new world with both caution and curiosity. The stakes are high, and the potential rewards could be transformative.
Source
This article is based on: Tokenization Is ‘Mutual Fund 3.0,’ Bank of America Says
Further Reading
Deepen your understanding with these related articles:
- SmartGold, Chintai Tokenize $1.6B in IRA Gold, Add DeFi Yield for U.S. Investors
- Galaxy Digital stock goes onchain with Solana tokenization
- Crypto expected to handle a tenth of post-trade market by 2030: Citi survey
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
