BlackRock explores the tokenization of ETFs, aiming to bring TradFi to the on-chain market.

The world's largest asset management company BlackRock is exploring the tokenization of ETFs, aiming to bring around-the-clock trading, broader global access, and greater integration of cryptocurrencies into the traditional financial (TradFi) market.

After making breakthroughs in the Bitcoin ETF space, BlackRock is attempting to actively explore the tokenization of traditional ETFs and leverage the advantages of the cryptocurrency ecosystem, such as 24/7 trading and global real-time settlement, through blockchain technology, thereby bridging the gap between traditional finance (TradFi) and Web3.

BlackRock has a unique advantage in this field. The company not only issues the world's largest Bitcoin ETF but also successfully operates a tokenization U.S. Treasury fund, placing the institution in a favorable position to combine these two concepts.

Currently, traditional institutional investors are limited by established trading hours, while the cryptocurrency market features the year-round trading characteristics of Web3. BlackRock's attempt at ETF tokenization this time is more about assessing whether this innovative solution can effectively introduce more Web3 trading characteristics into the traditional financial market.

BlackRock is not only in a favorable position to explore how to integrate Web3 capabilities into the traditional finance (TradFi) market but also aims to provide important reference points for regulators. For instance, the U.S. Securities and Exchange Commission (SEC) is also exploring new rules for continuous trading in TradFi, which may provide an opportunity for tokenized ETFs to demonstrate their value.

However, the widespread application of tokenized ETFs also faces key challenges. Currently, tokenized trading is primarily concentrated in native cryptocurrency companies, while the performance of the risk-weighted assets (RWA) market has not yet reached market expectations.

In addition, renowned ETF analyst Eric Balchunas has expressed skepticism about the appeal of tokenized ETFs. Meanwhile, U.S. regulators are also considering more aggressive measures to promote the development of the cryptocurrency market, rather than relying on the tokenization of ETFs linked to real-world assets (RWAs) such as stocks.

In summary, although BlackRock's exploration of ETF tokenization reflects the financial industry's desire for innovation and may drive reform into reality, whether this move can successfully bridge the gap between TradFi and Web3 remains to be further validated by the market.

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