For years, tokenisation was a buzzword that never quite had much to show for it. That’s changing. The market for tokenised real-world assets on public blockchains has marched past $26bn, nearly quadrupling over the past year, and funds — particularly those backed by Treasuries and money market instruments — now represent the single largest category, accounting for around $10.5bn of the total.
For fund managers and allocators, the question is no longer whether blockchain infrastructure will make any waves, but now how soon, and in what form.
Large institutions leading the charge
Large fund and asset managers have been experimenting with the technology for a while and have quietly built real world applications based on a blockchain. BlackRock’s BUIDL fund — a tokenised money market vehicle investing in short-duration US Treasuries — surpassed $2bn in assets under management and has distributed over $100m in dividends since its March 2024 launch. It now sits on eight different blockchains, increasing its accessibility.
In February 2026, BlackRock took a larger step: it began trading BUIDL on Uniswap’s decentralised exchange platform and purchased Uniswap’s governance token, marking its first direct engagement with DeFi [Decentralised Finance] trading infrastructure.
Meanwhile, Franklin Templeton and Ondo Finance are running competing tokenised Treasury products, and Binance now accepts BUIDL as off-exchange collateral for institutional trading.
These are no longer thought experiments. They represent real capital flowing through blockchain rails, with real custody arrangements, real compliance frameworks, and real yield being paid to token holders. The infrastructure is being built by the same institutions that run more traditional fund ecosystems.
What might tokenisation mean for fund holders?
When you cut away all the buzz words and jargon, there does seem to be an active and operational underlying useful proposition. Traditional money market funds typically require one to three days for settlement; tokenised equivalents settle in just seconds. Ownership records sit on a shared ledger rather than being reconciled across multiple different and often loosely interoperable intermediaries. Smart contracts can automate compliance checks, dividend distributions, and transfer restrictions.
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For fund managers, this means potentially lower operational costs and faster capital deployment. For allocators, it introduces the possibility of 24/7 liquidity, fractional access to products that sat behind by high minimums, and the ability to use fund positions as collateral in ways that traditional structures don’t easily permit.
The fractionalisation aspect could be particularly useful for private markets by allowing increased transparency and mark-to-market price discovery. These aspects have been the main hurdles that proponents for private assets have found these objections more challenging to overcome for investors used to being able to value an asset easily and transparently daily.
Some private equity fund managers are already using tokenisation to facilitate cheaper deals, and the logic extends naturally to any fund structure where access has historically been constrained by ticket size or liquidity terms. A tokenised LP interest that can be traded on a secondary market — even a permissioned one — is a fundamentally different product from one locked up for seven years.
The regulatory backdrop is catching up… slowly
One reason institutional momentum is building is regulators have become more welcoming and understanding: tokenisation may help institutions to upgrade the underlying system plumbing, not the legal nature of the asset.
In January 2026, the SEC issued a joint statement establishing a taxonomy for tokenised securities, confirming that existing federal securities laws apply regardless of whether ownership is recorded on-chain or off-chain. In March, the federal banking agencies jointly clarified that tokenised securities should generally receive the same capital treatment as their non-tokenised equivalents.
On the legislative side, the GENIUS Act in the US established the first federal framework for stablecoins in 2025, and the Clarity Act, expected to come into effect in 2026, would standardize the definition of digital commodities and codify registration requirements for brokers and dealers. Domestically, the UK’s FCA advanced fund tokenisation proposals in late 2025 to keep London competitive in asset management, and Japan is set to cut crypto-related tax rates to align with traditional capital gains in 2026.
The chair of the US Securities & Exchange Commission, Paul Atkins, recently said “all US markets will be on chain within two years”. If this is accurate, then it may not be long before we see more capital flowing towards assets listed on a blockchain ledger.
These may be encouraging steps, but it’s a long way from the finish line. Cross-border regulatory fragmentation remains a real obstacle. Questions around investor protection in DeFi venues, the legal finality of on-chain transfers, and custody standards for tokenised instruments are still being worked through.
What should investors be looking out for?
There are a few different interwoven threads that could be worth monitoring over the next 12 to 18 months.
First, interoperability. Legal clarity, interoperability across chains, and shared identity rails are needed to keep tokenised markets from fracturing into disconnected pools. If tokenised fund shares end up isolated or siloed on different blockchains with no efficient way to move between them, the assumed liquidity benefits could quickly evaporate.
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Second, the collateral use case. BUIDL’s acceptance as trading collateral on Binance hints at a future where tokenised fund positions become a building block for capital-efficient portfolio construction — not just an alternative wrapper for the same exposure.
Third, the competitive dynamics. One industry forecast suggests more than half of the world’s top 20 asset managers will launch tokenised products by the end of 2026. If that materialises, differentiation will shift quickly from “here’s our tokenised fund or product” to “here’s how our product integrates with the ecosystems that matter.”
Summary
Tokenised funds probably won’t replace traditional fund structures overnight. Custody arrangements are still being standardised, distribution channels are narrow, and the investor base skews heavily institutional. But, the direction of travel seems clear, and the pace looks to be accelerating.
For fund professionals, this is a space that warrant attention now — not because the change has arrived, but because the plumbing is being laid, and the firms that understand it early might have a meaningful structural advantage when adoption broadens into the mainstream via adviser-led wrap platforms.
Sam Leary is a senior investment specialist at Tatton Investment Management