BlackRock Explores Tokenized ETFs to Merge TradFi and Web3

BlackRock is testing the potential of tokenized exchange-traded funds (ETFs), aiming to bring 24/7 trading, global accessibility, and deeper crypto integration to traditional finance. The move follows growing interest in tokenized assets, with both Web3 firms and major financial institutions exploring their potential.

The asset manager already leads the market with the largest Bitcoin ETF and a successful tokenized U.S. Treasury fund, giving it a unique position to experiment with combining traditional ETFs and blockchain technology. Tokenized ETFs could allow investors to trade around the clock like cryptocurrencies, bypassing the restricted hours of conventional markets.

This initiative also aligns with broader discussions among regulators. The U.S. Securities and Exchange Commission (SEC) is considering policy changes to accommodate continuous trading, though BlackRock’s approach tests whether tokenization can achieve the same outcome.

However, challenges remain. The real-world asset (RWA) sector has not met expectations, with most adoption limited to crypto-native platforms. ETF analysts like Eric Balchunas question the appeal, suggesting that a new regulatory framework might be more effective than tokenizing traditional products. Moreover, institutional demand for RWAs has so far been modest, raising doubts about whether tokenized ETFs can attract mainstream participation.

Even if the experiment doesn’t achieve long-term success, BlackRock’s efforts highlight a significant trend: traditional finance is actively seeking ways to integrate blockchain efficiencies. By pushing tokenization forward, the firm underscores industry demand for innovation that bridges crypto markets and regulated investment vehicles.

With increasing pressure for modernization, BlackRock’s move could accelerate reforms in both crypto and traditional markets, even if tokenized ETFs themselves don’t become the dominant solution.