JPMorgan says tokenization will drive change across entire funds industry, but 'good use cases' still years away

A top JPMorgan ETF executive said tokenization should drive change across the entire funds industry.

"We believe tokenization will certainly drive how the market changes, not just for ETFs but across the funds industry as a whole," said Ciarán Fitzpatrick, JPMorgan's global head of ETF product, securities services, in a post from Friday.

Fitzpatrick noted that experimentation with tokenizing ETFs is ongoing, given potential benefits like enhanced creation and redemption, "near-instant settlement" and nonstop access. "My view on tokenization is that it will become part of the ETF ecosystem, but we’re a couple of years away from some good use cases," he added.

The executive said JPMorgan is already looking into different use cases through Kinexys, the bank's blockchain business unit.

Both traditional financial institutions and regulators have, in recent times, shown an increased willingness to tokenize established investments, particularly those that trade on exchanges that close during weekends, like equities and funds. Hester Peirce, a commissioner at the U.S. Securities and Exchange Commission, recently encouraged firms exploring tokenized products to engage directly with the agency.

The SEC has authorized various tokenization efforts, including approving a rule change enabling Nasdaq to support tokenized share trading. The New York Stock Exchange, Robinhood, Kraken, and Coinbase are all hoping to scale tokenized equities offerings.

Many analysts expect tokenized assets to swell into the trillions of dollars over the next decade. Projections range from roughly $2 trillion to more than $10 trillion by 2030.