The trend toward using public blockchains in traditional finance (TradFi) sectors is gaining momentum, with major institutions like BlackRock pioneering the movement. According to Celisa Morin, a former executive at Grayscale and now head of the crypto department at Reed Smith, more traditional financial institutions are now opting to tokenize assets on public blockchains, following BlackRock’s example.
A Shift from Private to Public Blockchains
Celisa Morin, speaking in a recent interview, highlighted a shift in preference among traditional financial firms from private to public blockchains. This shift is attributed to the successful implementation of tokenized projects by leading financial giants. BlackRock, for example, recently launched a $100 million fund tokenized on the Ethereum network, signaling a major endorsement of public blockchains.
Despite potential regulatory hurdles, such as the need for more stringent KYC and AML protocols on public networks, the benefits of transparency and accessibility seem to outweigh the challenges. Morin pointed out that while private chains like JPMorgan’s Onyx were popular in the past, the current trend strongly favors public options.
Challenges and Opportunities in Tokenization
The adoption of public blockchains is not without its challenges. BlackRock’s venture into blockchain led to its wallet becoming a target for spoofs and legally dubious transactions, highlighting the potential risks involved. Despite these issues, the move has been largely positive, with BlackRock’s tokenized fund now holding $288 million in assets.
Other institutions, such as Franklin Templeton, have followed suit, launching tokenized funds like the Franklin OnChain U.S. Government Money Fund on Ethereum’s layer-2 network, Polygon. This fund alone has attracted significant investment, demonstrating the growing confidence in public blockchain technology within TradFi.
Skepticism About Immediate Regulatory Approvals
Despite the enthusiasm for blockchain technology, Morin remains cautious about the immediate future of cryptocurrency-related financial products, such as the much-anticipated Ethereum ETFs. She reflects on the slow regulatory progress and lack of communication from the SEC, suggesting that approvals for new ETFs may not be forthcoming as quickly as some might hope.
Embracing Blockchain in TradFi
As traditional financial institutions continue to explore and adopt blockchain technology, the landscape of finance is evolving. With leaders like BlackRock setting the pace, the integration of blockchain into traditional finance seems not only possible but inevitable, promising a new era of innovation and efficiency.
