But Slavin said companies seem reluctant to wait. “Although the regulations and the rails are not completely ready yet, they want to get products out,” he said.
Wall Street believes that blockchain networks could eventually become a new distribution channel for traditional investment products. Tokenized funds could allow investors to hold and transfer fund shares 24 hours a day, which could reduce settlement times and expand access to global investors.
One concern that is emerging for fund issuers, according to Slavin, is that tokenized versions of well-known ETFs are already traded on platforms outside of traditional financial markets, often without the direct involvement of the fund sponsors themselves.
“There are ETFs, like hundreds of them, listed on unregulated markets around the world,” he said.
Since anyone can theoretically create a tokenized representation of an exchange-traded fund, issuers face the possibility of products bearing their names circulating beyond their oversight.
“It’s opaque,” he said. “It effectively creates a reputational risk, although frankly it is not at all related to the asset manager.”
That dynamic has become a growing topic of discussion among BNY’s asset management clients as they evaluate their own tokenization strategies. Just like in the early days of bitcoin and cryptocurrency trading, the technology is evolving faster than the rules that govern it.
