F/m Investments Aims for SEC Approval to Tokenize Treasury ETF Shares

treasury etf

Key Takeaways:

F/m Investments seeks SEC approval for tokenizing its $6 billion Treasury ETF shares.
The tokenized shares will be identical in rights and structure to the traditional ETF shares.
This initiative highlights the increasing acceptance of tokenization in regulated investment funds.

In a significant move, asset manager F/m Investments has requested the United States Securities and Exchange Commission (SEC) to approve the tokenization of shares from its primary Treasury exchange-traded fund (ETF). This application was filed on Wednesday and is aimed at obtaining exemptive relief that would enable the ownership records of the F/m US Treasury 3 Month Bill ETF (TBIL) to be stored on a permissioned blockchain.

The TBIL fund manages approximately $6 billion in assets and will continue to operate as a traditional ETF governed by the Investment Company Act of 1940.

F/m’s Groundbreaking Proposal for ETF Share Tokenization

In a press release announcing its filing, F/m described its proposal as pioneering, being the first attempt by an ETF issuer to seek US regulatory approval specifically for tokenized shares of a registered investment company.

As part of this innovative plan, the shares recorded on the blockchain would bear the same CUSIP identifier as the current TBIL shares and would deliver equivalent rights, fees, voting powers, and economic benefits.

Importantly, F/m has clarified that this initiative is not about creating a new type of digital asset. Instead, it aims to introduce tokenization as an alternative method for documenting ownership, functioning alongside conventional record-keeping systems typically utilized by brokerages and custodians.

This filing puts F/m in line with a growing trend among traditional asset managers exploring tokenization. Notably, Franklin Templeton has previously launched blockchain-enhanced US government money market funds, transitioning share ownership records onto the blockchain while ensuring adherence to federal securities regulations.

F/m’s proposal broadens this model to encompass a listed Treasury ETF, potentially increasing access to tokenized fixed-income products within regulated markets.

The firm also made a clear distinction between its tokenization approach and crypto-native instruments, such as stablecoins or unregistered tokens. F/m emphasized that tokenized TBIL shares would still be governed by independent board oversight, regular portfolio disclosure, third-party custody and audits, plus investor protections inherent in the 1940 Act.

If the SEC grants approval, the TBIL shares would be tradable through traditional brokerage channels as well as on digital platforms that are aware of tokens, all under a unified share class. F/m confirmed that both the fund’s investment strategy and portfolio composition would remain unchanged.

NYSE's Push for Tokenization and Market Trends

This application to the SEC coincides with a growing interest in tokenization across financial markets. Just recently, the New York Stock Exchange (NYSE) announced plans for a new trading platform aimed at facilitating 24/7 trading and onchain settlement of tokenized stocks and ETFs, showcasing the industry's movement from pilot projects towards extensive adoption.

Market predictions highlight a substantial opportunity. Standard Chartered previously estimated that the market capitalization for tokenized real-world assets could reach $2 trillion by 2028. Additionally, recent research by Web3 digital property company Animoca Brands suggested that the tokenization of real-world assets could unlock a $400 trillion market within traditional finance.

In a further development, Libeara, a blockchain infrastructure platform supported by Standard Chartered’s venture segment SC Ventures, launched a new tokenized gold investment fund in Singapore last month. This initiative brings a historically secure asset into the digital space and allows professional investors to engage with gold through blockchain-based tokens recorded on Libeara’s ledger.