F/m Investments seeks to become first ETF issuer to tokenize shares

F/m Investments, a prominent asset manager known for its suite of Treasury ETFs, has filed an application with the U.S. Securities and Exchange Commission (SEC) outlining its intent to tokenize shares of its actively managed exchange-traded funds (ETFs).

If successful, F/m Investments would become the first ETF issuer to utilize distributed ledger technology (DLT) – commonly known as blockchain – to represent ownership of its fund shares. This ambitious initiative aims to fundamentally overhaul the traditional ETF structure, moving away from conventional clearing and settlement systems.

The proposal focuses on leveraging tokenization to facilitate instantaneous or near-instantaneous settlement (T+0), dramatically improving upon the current industry standard of T+2. By recording ownership rights on a blockchain, the firm seeks to enhance operational efficiency, reduce counterparty risk, and potentially lower costs associated with share transfers and record-keeping.

The initial focus appears to be on F/m’s actively managed fixed-income ETFs. The filing emphasizes that while the underlying technology changes the method of tracking ownership, the ETFs will continue to operate under existing regulatory frameworks governing mutual funds and ETFs, ensuring compliance with current custody and registration rules.

Industry experts view this move as a critical step in bridging traditional finance (TradFi) with decentralized finance (DeFi). Although the regulatory path forward for tokenized securities remains complex and highly scrutinized by the SEC, approval could set a significant precedent, encouraging widespread adoption of blockchain technology across the multi-trillion dollar ETF market.

Source: F/m Investments seeks to become first ETF issuer to tokenize shares