The new white paper, Empowering digital distribution: The strategic rise of tokenised funds, projected that tokenised fund assets under management (AUM) could reach US$235 billion by 2029, led by money market funds (MMFs).
It comes as local cryptocurrency exchange Swyftx established a strategic partnership with online broker Totality – in another move fusing traditional and decentralised finance (DeFi) in Australia.
The findings, based on a survey of asset managers and DeFi providers across the globe, found that both groups view tokenisation as strategically important.
While managers stand to benefit from cost savings, faster launches and broader distributions, DeFi platforms can gain new treasury management tools and client retention benefits.
Commenting on the findings, chief technology officer at Calastone, Adam Belding, said tokenisation provides the “bridge” between the two players.
“This is where supply and demand finally converge; we have reached a turning point where asset managers can leverage tokenisation to compete and win new customers in the DeFi space now,” he said.
Asset managers showed a clear preference for collaborating with technology partners and DeFi platforms over developing in-house capabilities or engaging directly with investors.
As the report explained, the tokenisation of traditional funds is already an ongoing development. Multiple asset managers have launched tokenised funds since the beginning of 2024 and inflows have begun to accelerate, with AUM up by 85 per cent since December.
However, the projected figure of US$235 billion represents a 58-fold increase from 2024 – indicating that the movement is now at a significant inflection point.
Asked about this figure, Lucia Uen, CloudTech Group general manager, custody, said while the projection is optimistic, it is plausible with the right tailwinds.
“That is to say that regulatory clarity must keep improving and distribution partnerships must keep scaling,” she told InvestorDaily.
She also noted that BlackRock has previously projected between $5 and $10 trillion in tokenised funds by 2030.
In any case, of the asset managers surveyed, nearly a third (28 per cent) said they plan to distribute tokenised funds by 2030, up from the 13 per cent who plan to do so by next year. Meanwhile, half of the DeFi platforms respondents said they expect their tokenised holdings to rise by at least 25 per cent by 2030.
Benefits for asset managers
Of the managers that have already launched a tokenised fund, 65 per cent said they saw benefits over traditional models. Examples included automation, improved liquidity and the ability to reach new investors.
Additionally, the report forecast significant reductions in fund operating expenses – generating $135 billion in industry-wide cost reductions.
Fund operating costs currently stand at 0.74 per cent of AUM and are set to increase by 32 per cent over the next three years. The paper projected that tokenisation could cut these costs by 23 per cent – delivering savings of 0.13 per cent of AUM.
However, Uen countered that while lower costs could enable more competitive fee structures, this development is more likely to take place over an extended period.
“It’s likely that asset managers will initially focus on accessing new markets rather than competing on price, but as the technology matures and competition intensifies, the cost savings could well translate into more competitive fee structures across the industry,” she said.
The paper also predicted that tokenisation would accelerate fund launches, reducing the time from 12 to 9 weeks and decreasing seed funding requirements by 24 per cent.
Benefits for DeFi providers
DeFi providers identified MMFs as a prime candidate for tokenisation, with 80 per cent believing tokenised funds could enhance treasury management. Such funds were seen by 75 per cent of respondents as a tool to help retain client assets, with 40 per cent also believing they have the potential to attract new investors.
As explained in the report, most DeFi platforms still rely on conventional MMFs or bank deposits for their cash management, despite operating on decentralised rails. Simultaneously, DeFi investors seek access to these products on their existing cryptocurrency trading platforms, generating a two-tiered demand.
Taken together, tokenised MMFs present an appealing option, merging the security, liquidity and returns of conventional products, with the inherent advantages of blockchain technology, including on-chain settlement, compatibility with digital wallets and improved transparency.
“They represent something close to the best of both worlds, combining the security of the old with the flexibility of the new,” the report stated.
Belding added that the convergence also offers benefits to investors who want access to these assets on the same venues where they hold and trade their digital assets.
Speaking to InvestorDaily, Uen agreed, emphasising that of all the drivers of tokenised fund adoption, DeFi’s need for treasury solutions is “paramount”.
Despite rapid growth and substantial total value, she explained that the DeFi ecosystem lacks institutional-grade investment options for treasury management and is limited in the ways to deploy idle capital beyond basic staking or lending. Tokenised funds essentially “fill this gap”.
“This represents immediate, structural demand from a growing market segment that currently has few alternatives, thus making it a more powerful adoption driver than competing with existing traditional fund structures,” Uen said.
At the same time, while MMFs were identified as the “obvious entry point”, the report highlighted that they were not the sole asset class under consideration. Private market funds were also closely examined, with traditional mutual funds and hedge funds also on the list.
Barriers to adoption
As previously reported by InvestorDaily, the adoption of tokenised funds in Australia still faces barriers to entry.
Careful navigation of the evolving regulatory landscape is essential, especially for global fund managers who need to coordinate cross-border regulatory adherence, as Uen explained.
Ultimately, from an operational standpoint, she concluded that the “primary challenge” lies in integrating the two systems.
“Bridging the divide between decentralised finance and traditional financial systems remains the most significant hurdle.”
