Tokenized Funds Are Quietly Reshaping Institutional Finance

Tokenized short-term funds are quietly reshaping how institutions manage liquidity, offering a digital alternative to traditional money market products.

Built on blockchain and typically backed by U.S. Treasurys or similar low-risk assets, these funds have grown to $5.7 billion in assets since 2021, according to Moody’s.

Unlike conventional funds, tokenized versions allow for fractional ownership and real-time settlement, making them attractive for asset managers, insurers, and brokerages seeking faster and more flexible yield strategies. Moody’s highlights growing use cases, including institutional yield optimization, insurance liquidity management, and deployment as collateral in trading or DeFi lending.

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While still small compared to the $7 trillion in traditional money market assets, interest is accelerating. BlackRock leads the sector with $2.5 billion in its digital liquidity fund, followed by Franklin Templeton, Circle, Superstate, and Ondo Finance—all managing hundreds of millions.

European investors are joining in, with Germany’s Midas launching a tokenized treasury product with no minimum investment. Robinhood has also expanded into Europe and is advocating for clear tokenization rules in the U.S., calling it a transformative shift for capital allocation.

However, blockchain-based funds aren’t without risks. Moody’s points to potential vulnerabilities, including smart contract errors, cyber threats, and discrepancies in legal ownership records. Even so, the firm expects broader adoption as financial institutions seek efficient digital tools to move and grow capital.

Alexander Stefanov

With over 8 years of experience in the cryptocurrency and blockchain industry, Alexander is a seasoned content creator and market analyst dedicated to making digital assets more accessible and understandable. He specializes in breaking down complex crypto trends, analyzing market movements, and producing insightful content aimed at educating both newcomers and seasoned investors. Alexander has built a reputation for delivering timely and accurate analysis, while keeping a close eye on regulatory developments, emerging technologies, and macroeconomic trends that shape the future of digital finance. His work is rooted in a passion for innovation and a firm belief that widespread education is key to accelerating global crypto adoption.