Fidelity's Lai: Tokenization Enhances Balance-Sheet Management for Institutions

Giselle Lai, director and digital assets strategist for APAC at Fidelity International, emphasizes that tokenized funds' primary value for large institutions lies in balance-sheet management rather than just liquidity. Institutions often hold cash in multiple bank accounts to meet regulatory requirements and manage currency exposure, which can lead to unproductive deposits. Tokenized assets could provide a more efficient solution for liquidity management across different accounts, allowing for 24/7 operations. Tokenized instruments, which represent real-world assets on blockchain ledgers, can facilitate efficient movement and yield generation. Currently, tokenized money market funds, primarily backed by U.S. Treasuries, dominate the market, with over 15 billion dollars in assets under management. The broader onchain real-world asset market has surpassed 31 billion dollars, while the global asset tokenization market is valued at approximately 2.1 trillion dollars. Projections indicate this sector could reach 24.5 trillion dollars by 2033, with estimates suggesting up to 88 trillion dollars by 2035. Institutional investors prioritize the functional benefits of tokenized assets over trading ease, seeking faster and cheaper asset management solutions. Despite growing demand, developing a comprehensive balance-sheet management tool will take time, akin to the 20-year evolution of the ETF industry.