Owning and trading assets as digital tokens could transform markets, and money market funds are leading the charge. We explore what this means for investors.
Read this article to understand:
- How tokenisation works
- Why it matters for investors
- Key points to consider for digital tokens
For more than a century, Van Gogh’s Starry Night has graced the walls of the Museum of Modern Art in New York. It is priceless, iconic, accessible only to those able to visit in person, and certainly far beyond the financial reach of most.
Tokenisation could transform that reality. Instead of treating the painting as a single, indivisible asset, tokenisation could divide it into digital tokens, each representing a legally enforceable fraction of ownership.
Such tokens are recorded on a blockchain – a secure, transparent, and tamper‑resistant digital ledger shared across multiple computers. They allow broader participation in the ownership of once‑exclusive assets and provide a new way to buy, sell, and trade value.
Take Starry Night as an example:
- Fractional ownership: The painting could be divided into one million tokens, each representing a tiny slice of its value, opening participation to a wider range of investors.
- Global access: The tokens could be bought or sold with just an internet connection – no flights to take, galleries to visit, or stacks of paperwork to fill.
- Liquidity: Unlike traditional art sales that can take months, tokens can trade on regulated digital platforms in seconds.
- Programmability: When predefined conditions are met, smart contracts – code stored on the blockchain – can automatically execute actions such as transferring ownership or distributing income.1
While a work of art makes the concept easy to picture, the same qualities apply to financial assets. From money market funds to equities, tokenisation is unlocking similar benefits at scale. Recent examples include tokenised money market funds from major managers, and experiments in tokenised treasuries and indices.
Origins and evolution
Tokenisation didn’t appear overnight; it emerged from the convergence of blockchain (a shared, fixed ledger), smart contracts, and the need to modernise the plumbing of today’s markets. As blockchain matured, platforms enabled programmable transactions and on‑chain records, laying the groundwork for smarter ownership and faster settlement.
Tokenisation didn’t appear overnight
In the UK, the Investment Association’s Technology Working Group published a Blueprint for Implementation in 2023, setting out a phased approach to fund tokenisation under existing rules.2 The FCA has continued building momentum through guidance, and published a phase‑two roadmap in 2024.3 Across Europe, regulators and industry bodies from EFAMA to national authorities have advanced frameworks for tokenised funds and explored the infrastructure needed to scale.4
Why does Tokenisation matter for investors?
Tokenisation reimagines how existing assets are owned and exchanged. The potential gains are both practical and tangible:
Efficiency
Recording investor registers and transactions on a single distributed ledger reduces reconciliation and speeds up trade, settlement, and distribution.
Access
Fractional ownership and digital distribution lower the minimum size of holdings and broaden participation, whether the underlying asset is a fund unit, a treasury instrument, or a slice of a real asset, like a piece of infrastructure.
Liquidity
Tokens can trade more flexibly, including through peer‑to‑peer transfers and extended hours on suitable venues (subject to regulation and product design).5
Transparency
On‑chain records offer near‑real‑time visibility of ownership and movements, which could improve the ease of audit and operational control.
For investors, tokenisation means faster transactions, smoother operations, and improved access – all without altering the underlying investment strategy.
How a tokenised fund works
1. Asset immobilisation
The backing asset (e.g., a money market fund unit) sits with the custodian/transfer agent in a regulated environment.
2. Digital representation
The fund issues tokens that map to rights in the underlying asset and embed compliance rules.
3. Blockchain backbone
Tokens are recorded on a “tamper‑resistant” ledger for transparent, secure, and near‑instant settlement.
4. Programmability
Smart contracts can be used to automate actions such as income distribution, eligibility checks and transfers, reducing manual intervention.
Examples of tokenisation and market growth
Tokenisation has been adopted most widely in money market funds.6 The global AUM of tokenised money market funds (TMMFs) has grown tenfold in two years – from under $1 billion in 2023 to approximately $9 billion by late 2025, according to the Bank for International Settlements.7
Based on consolidated data, Aviva Investors estimates it had reached $13.5 billion by year-end 2025. But this is still only a fraction of the $13 trillion global MMF market. Growth is steep but early-stage.
Beyond TMMFs, tokenisation is expanding
Treasuries
Tokens backed by government securities enable fractional exposure with on-chain settlement and programmable coupon payments.
Other funds
Corporate bond and private-market funds have launched pilots, showing tokenisation’s potential across strategies.8
And another major category of blockchain-based assets has gained traction: stablecoins, which are designed to behave like digital cash. They are tokens typically backed one-to-one by highly secure assets like short-dated government bonds, so they can always be exchanged for an equivalent amount of traditional currency. By the end of 2025, their combined market value exceeded $300 billion, highlighting the scale of this segment.9
Under the EU’s Markets in Crypto-Assets (MiCA) regulation, stablecoins are classified as e-money tokens and cannot pay interest directly to holders.10 This is an important distinction from tokenised funds, which can distribute yield. To earn a return, holders often place stablecoins into other vehicles – historically via decentralised lending platforms, but increasingly through regulated options such as tokenised money market funds or blockchain-based bank deposits.
Challenges and considerations of tokenisation
While tokenisation offers clear benefits, it also introduces new complexities investors and managers will need to work through. Success depends not only on understanding the technology, but also on adapting processes, controls, and governance frameworks. Key areas to focus on include:
Regulatory clarity
Rules for tokenisation are still evolving, and they differ by region. Investors and managers need to understand how local regulations apply to tokenised assets, including requirements for custody, disclosure, and settlement. Staying informed and working with regulated providers will be key to ensuring compliance and protecting investors.
Cyber risk
A strong focus on cyber security is essential when implementing new technology. Blockchains and the tokens recorded on them are inherently secure thanks to advanced cryptographic protocols. However, risks still exist, particularly around digital custody and wallets. Wallets rely on private keys, which can be compromised through phishing or other human-factor attacks. Losing a private key typically means losing access to the asset, often without recourse. Robust controls, secure key management, and new protocols will be vital to mitigate these risks.
Operational considerations
For many investors, existing systems and processes are built around traditional assets. Tokenisation introduces changes that may require adjustments. This could mean working with new providers, such as digital-asset custodians, updating how reconciliations are handled, and adapting risk management tools to provide more real-time visibility. These changes will take planning and may involve additional costs.
Strategic readiness: What should investors do?
Stay informed
Follow how tokenised fund platforms evolve, including registers, settlement, and cross‑chain mobility.
Ask questions
Understand what is tokenised, how settlement works, how assets are safeguarded, how distributions are processed – and how this complements your cash and collateral strategy.
Engage with managers
Leading firms are piloting and launching products in regulated structures. Be curious; don’t hesitate to ask your fund manager about their plans and how you can benefit.
Conclusion: The future is digital
Owning a fraction of Starry Night makes the idea of tokenisation intuitive. But the real opportunity is in modernising familiar instruments – shares, bonds, and especially money market funds – with secure, programmable digital units that settle faster and operate with greater transparency.
As tokenisation gains traction, it promises efficiency, access, and innovation, provided it is combined with sound governance and regulatory discipline. As the industry moves from pilot projects to full-scale adoption, now is the time to understand and engage with this transformative trend.
