BlackRock is exploring the tokenization of ETFs to enable 24/7 trading, DeFi composability, and on-chain settlement. This initiative could impact asset managers, custodians, and market regulators. The stated objective is to make markets more accessible and efficient for investors.
Context and Impact
BlackRock’s interest in tokenized ETFs arises amid the growth of asset tokenization. Companies like Ondo Finance have already launched over one hundred tokenized stocks and ETFs on Ethereum, providing continuous on-chain access and collaborations with Alpaca and Trust Wallet, with deployment noted on September 3, 2025.
Among the technical advantages are on-chain settlement, automation through smart contracts, and cost reduction via Layer 2 solutions. Tokenization also enables tracking flows and valuing assets in real time, facilitating their use as collateral or in lending protocols.
The initiative faces regulatory challenges. The text emphasizes that the SEC should update existing rules, including the Investment Company Act and broker-dealer requirements, to include tokenized securities. Additionally, AML/KYC compliance and diverse international frameworks are practical hurdles for adoption.
The exploration is summarized in a cited statement:
“BlackRock is exploring tokenized ETFs, a move that could bring 24/7 trading, DeFi composability, and on-chain settlement to traditional markets.”
However, it warns about risks such as smart contract issues, cyberattacks, initial liquidity challenges, and the need for robust custodians to back the assets.
Implications for Tokenized ETFs and the Market
Practical implications include greater cooperation between traditional finance and DeFi, pressure on custody and settlement infrastructure, and regulatory demands to clarify the legal treatment of these tokens. For asset managers and product teams, tokenization opens new distribution channels but requires KYC/AML processes compatible with common rules.
Operational progress is already underway. Ondo Finance reported the launch of over one hundred tokenized assets on Ethereum, and its collaborations with Alpaca and Trust Wallet increase the utility of these products. Technical risks, including smart contracts and security threats, are highlighted as key points to mitigate, while SEC adaptation and compliance with the Investment Company Act remain significant challenges.
BlackRock’s exploration of tokenized ETFs coincides with on-chain operational implementations by other providers.
