Top Analysts Debate Future of ETFs, Will Tokenization Take Over?

There is a current argument amongst Exchange Traded Fund experts and digital assets analysts that traditional ETFs will go into extinction in the next two decades as tokenized assets will take over. 

Tokenization to Eradicate Traditional ETFs 

The conversation started on X with Niccole Bardoscia Head of Digital Assets Trading at Intesa Sanpaolo. Sanpaolo noted that he spent his day with Senior Bloomberg ETF Analyst Eric Balchunas and some other industry experts in a panel discussing the subject. In his words, the subject of their discussion hinges on the sustainability of traditional ETFs and the implementation of tokenization.

Balchunas reacted to the post, citing that he enjoyed his time on the panel. However, he was also quick to point out that he disagrees with with some of the sentiments that were raised. Balchunas believes tokenization cannot be as simplified as what ETF offers and might not appeal to many investors.

You can get a full and diverse portfolio of basically everything via ETFs for like 5bps- and it is hugely regulated. And for end user there is ZERO friction. They click ‘buy’ and they done. I don’t see where the fat/friction/cost here that tokens make better. The liquidity / arb…

— Eric Balchunas (@EricBalchunas) June 7, 2024

Consequently, the Bloomberg ETF analyst released a poll, seeking followers opinions on how big they think tokenization of real world assets will get in the next twenty years.

Out of the 1,048 responses he has received so far, about 57% sees tokenization going bigger than ETFs in the long run. Another 23% believes that it is an overhyped concept that does not possess the capacity to grow big at all. While the last group, represented by 20%, are not sure of the direction that tokenization will take.

One of those who believe strongly in the ability of tokenization to overtake ETF is Nate Geraci, the President of ETF Store.

“I agree w/ Niccolo…” Geraci stated. “There’s a reason BlackRock, Franklin Templeton, etc are already tokenizing money market funds. Just the beginning.”

BlackRock And Floki Network Joins the Train

Noteworthy, BlackRock’s collaboration with real-world asset tokenization giant Securitize supports Geraci’s claim. In March, the American investment banking giant took a deep dive into the tokenization world with Securitize. The duo introduced a fund dubbed USD Institutional Digital Liquidity Fund, a private equity offering.

The proposed tokenized fund requires outside investors to invest a minimum of $100,000. The filing submitted to the United States Securities and Exchange Commission (SEC) stated that the estimated sales commission for the fund is $525,000 and there is no finder’s fee.

Similarly, Floki ecosystem has launched TokenFi, its native tokenization project. All of these integrations and support for tokenization suggests that the industry is experiencing a pivot that may become crucial in a few years.

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