2025 is seeing a major shift in TradFi attitudes towards digital asset technology. After years of tentative exploration, leading financial institutions are starting to engage with blockchain and Distributed Ledger Technology (DLT) in more serious and structured ways. Fund tokenisation, in particular, is moving from high level conceptualisations to genuine live deployments.
This is a new area for many firms, but it is one where the opportunity is too great to ignore. Tokenisation represents the third major revolution in asset management, following the rise of mutual fund investing and the growth of ETFs. It has the potential to radically transform how investment products are built, managed and distributed.
Automation That Cuts Cost and Complexity
At its core, tokenisation allows a fund to issue digital tokens that represent investor shares, with the fund’s operations – such as issuance, redemptions, NAV calculations and reporting – automated through smart contracts on a blockchain. What is traditionally a heavily manual process, involving a number of stakeholders and reconciliation days, can now be done almost instantly.
The implications of this are significant. Fund administration, which today absorbs substantial time and resources, becomes seamless and automated. This isn’t just operationally clearer – it is financially crucial. Tokenisation helps asset managers generate additional revenue and it enables cost efficiency. It streamlines operations while also opening up new opportunities through improved service, broader access, and faster execution.
Broadening Access, Improving Experience
Beyond cost savings, tokenisation could also expand the investor base. By fractionalising ownership, funds become more accessible to investors who might not have previously qualified. Investors no longer need to commit to an entire asset – they can buy a twentieth, or less, for example. This lowers the entry threshold and opens the door to new demographics, such as retail investors and digital-native generations like Gen Z.
Meanwhile, settlement times are reduced from days to seconds. Reporting, audit trails, and investor transparency are strengthened, and digital operations allow for lower costs and better-quality service. Previously, a transaction might take three days – now it can be done instantaneously. Against a backdrop of consumers expecting immediacy and personalisation, the traditional model risks appearing outdated.
So Why Has Take-Up Been So Slow?
The benefits are clear, but adoption remains cautious. Take-up is slow because of two major gaps: legal clarity across jurisdictions, and a lack of knowledge around blockchain infrastructure. Without closing these gaps, many asset managers are hesitant to move.
The legal analysis required across jurisdictions is complex and time consuming. What does your fund’s location allow? How is tokenised ownership treated under property law, for example? Which investor protections apply when investors are located in multiple countries? These are not minor footnotes either; they are central to the design of any compliant tokenised fund.
At the same time, blockchain infrastructure decisions are highly strategic. Managers must decide what kind of blockchain to use – public, private or hybrid – and how to balance transparency with confidentiality. Interoperability, smart contract standards, and settlement currencies all require careful planning. Without addressing these two core questions around legal jurisdiction and blockchain structure, the industry will likely remain in a holding pattern. It is also important to factor in possible issues that could arise because legislation in certain countries has not yet been updated to facilitate DLT-based systems specifically. Luxembourg and Switzerland have both enacted laws to facilitate the use of distributed ledger technology, particularly for securities and financial instruments, while other European countries have not.
Conclusion
This is just the start. Significant regulatory and market change will continue to operationalise fund tokenisation globally. It represents a fascinating innovation with significant potential value – offering enhanced liquidity, greater accessibility, and operational efficiencies. However, both transparency and an understanding of how fund tokenisation can work are needed. Now is the time for TradFi to evaluate and explore this approach and ensure readiness for the next revolution in digital asset technology.
