INVESTMENT managers have become increasingly vocal in their support of digital assets in recent months.
Back in December, as Bitcoin achieved regulatory and adoption milestones — topping the $100,000 mark before nudging downwards, fund managers were busy announcing new launches in the US, Canada and the UK.
BlackRock chief executive officer, Larry Fink, once derided Bitcoin as “an index of money laundering” back in 2017, but that now seems a distant memory.
Fast forward to 2025 and his firm manages the world’s largest spot Bitcoin exchange-traded fund (ETF) – the iShares Bitcoin Trust, which held net assets of $55bn at the time of writing – as well as the BlackRock Institutional Digital Liquidity Fund, which launched in 2024 on the Ethereum blockchain network.
Clearly, BlackRock is not alone in its embrace of digital assets. Global investment managers are looking to tokenise traditional assets on a vast scale, adopt blockchain technology faster and build or enhance their exchange-traded product (ETP) offering.
US bank State Street now offers crypto administration and accounting services and is making tokenisation a major part of its business model, helping clients convert ownership rights of traditional assets into digital tokens on a blockchain.
The group’s expansion has involved an accumulation of partnerships, including an alliance with Taurus, a Swiss company that operates a digital asset infrastructure. State Street is leveraging Taurus’s tokenisation and custody solutions to automate the issuance and servicing of digital assets, including digital securities.
The bank’s asset management business – State Street Global Advisors (SSGA) – joined forces with Galaxy Asset Management in 2024 to debut three digital-asset ETFs.
One fund offers exposure to cryptocurrencies and firms operating directly on the blockchain, the second offers the same exposures but with covered call and put options, and the third offers exposures to firms working in disruptive technology such as AI or blockchain.
The ETF launches are emblematic of a strategy designed to offer clients exposure beyond Bitcoin and other cryptocurrencies, to a broader set of assets in this space.
Early adoption
BlackRock and State Street may have been more prominently active in 2024, but Fidelity Investments was an early mover in crypto.
In 2018 it launched a subsidiary, Fidelity Digital Assets, offering custody services and a trading platform for institutional clients. This subsidiary also acts as the custodian for Fidelity Crypto – the firm’s retail crypto offering.
Fidelity Investments launched the Fidelity Wise Origin Bitcoin Fund – a spot Bitcoin ETP – in January 2024 and the Fidelity Ethereum Fund in July 2024.
Both ETPs were testament to what Fidelity described in the launch announcement as a “market readiness and customer demand for more products that provide new access points to digital assets.”
The wider proposition at Fidelity Investments includes optionsto trade spot cryptocurrencies (Bitcoin, Ether and Litecoin) directly, as well as the stocks of individual crypto-related companies or a basket of companies through ETFs.
Morgan Stanley, which has taken a substantial holding in BlackRock’s Bitcoin ETF, has thawed somewhat on the cryptocurrency, after allowing wealth advisors to offer Bitcoin ETFs to clients with a high-risk tolerance who hold at least $2m in assets on account.
This might reflect only a marginal change in its outlook, given executive chairman James Gorman labelled Bitcoin “speculative and volatile” at the beginning of 2024, adding that it should play for wealthy clients “only a very small role in their financial fabric.”
Vanguard, which had not developed its own Bitcoin ETF at the time of writing, and doesn’t offer access to crypto assets via its brokerage platform, has appeared reluctant to join the digital assets party this far.
Notwithstanding these circumspect views, the amplification and augmentation of crypto services by other asset managers has followed the SEC’s pivotal approval of 11 spot Bitcoin ETFs and Bitcoin’s strong performance at the end of 2024 and Ethereum’s growth in H2 2023.
2024, though, was a year of strategy deployment for the asset management community.
Strategy, execution, integration
Despite successive developments in the US and UK that have catalysed Bitcoin’s value, its relative infancy remains a factor in its volatility.
But the integration of Bitcoin and wider digital assets into the business models and distribution channels of asset managers suggests they’re in this for the long haul.
As they respond to rising investor demand for crypto holdings, these asset managers are now offering more structured access points, with trading platforms, tokenisation partnerships, custody services and ETFs that reflect long-term commitments.
At BlackRock, the strategy behind its ETF, its partnerships and the BUIDL tokenised fund – which enables investors to earn US dollar yields by subscribing through the Securitize Markets platform – is underpinned by its CEO’s newfound belief that Bitcoin is a “legitimate financial instrument”.
In media interviews throughout 2024, Fink expressed his view that, where there is a belief that countries are debasing their currencies through excess deficits, Bitcoin serves as a hedge and hands back financial control.
He has likened Bitcoin to digital gold, a comparison that took on greater significance when, in terms of net assets, BlackRock’s Bitcoin ETF surpassed its iShares Gold Trust – which has been running for 20 years – in less than 12 months.
Fink has also described tokenisation as the second step in a technological revolution in the financial markets, following the launch of spot Bitcoin ETFs as the first.
As BlackRock’s focus has turned emphatically to tokenisation as a growth lever, Securitize has become a vital partner in executing the strategy, as the asset manager looks to expand investor access to the trading of real world assets on a blockchain, and offering instantaneous, transparent settlement. It’s notable that BlackRock has taken a stake in the firm and put its head of ecosystem partnerships on the Securitize board.
The BUIDL fund is another important component in BlackRock’s plans to bridge the worlds of institutional finance and digital assets. The fund is backing a new stablecoin, UStb, from Ethena Labs – the developer of the stablecoin protocol Ethena. All three parties – BlackRock, Securitize and Ethena Labs – have worked together to develop UStb.
There are other angles to this expansion; BlackRock has reportedly been in talks with global crypto exchanges to explore how the BUIDL token can be used as collateral for derivatives trades.
Many sources said they expect collateral to be within an expanding set of use cases for tokenised assets this year.
Allan Trimmer, head of alternatives product development and management at Abrdn, said: “Using tokenised assets would make the posting of collateral easier and cheaper and has the potential for increasing the types of assets that can be used as collateral.”
If BlackRock’s plans for the use of BUIDL as collateral accelerate, it will compound its dramatic turnaround from sceptic to forerunner, but its competitors also laid down markers in 2024.
Poised for a leap
Upon launching its three digital asset ETFs this year, SSGA reiterated its belief that blockchain technology and digital assets have the power “to transform financial markets as well as the economy over the next decade”.
Anna Paglia, chief business officer for SSGA, said the next evolution of this market will be “the introduction of actively managed digital asset portfolios that help investors tap into the benefits of diversification”.
The company wants to offer clients, in an increasingly expansive way, access points that stretch across the digital asset ecosystem, helping them manage the short volatility swings of a single cryptocurrency.
Although reports earlier in 2024 claimed that State Street was considering developing a stablecoin or tokenised deposits, the firm has since said it has no current plans to launch either, though it hasn’t ruled out doing so in the future.
The company’s immediate focus is on tokenising a bond and a money market fund, with the objective of creating tokenised collateral for traders to use as margin calls, removing a need for them to liquidate holdings to raise cash. Another key aim of this is to provide a commercial incentive, as well as an operational efficiency benefit.
As an early mover, Fidelity Investments has also made headlines in the past two years with its innovations, particularly the workplace Digital Assets Account (DAA) – a proposition for individuals to have a portion of their retirement savings allocated to Bitcoin.
This was the first time US employers were given the option to offer US employees access to Bitcoin through an investment option in their core 401(k) retirement plans.
Citi made a notable venture in the digital assets space during 2024. It announced a partnership with London-based Fidelity International (a separate brand to Fidelity Investments) on a tokenised money market fund, which has an embedded digital foreign exchange (FX) swap solution.
The two parties jointly announced the completion of a successful proof of concept for the fund, which has been developed to enable investors to conduct seamless, real-time settlements of multi-asset positions in different currencies.
At the time of the launch, Citi and Fidelity International said the fund had the potential to eliminate delays and enable faster, more efficient management of treasury positions. For the pilot, the two firms trialled smart contracts to synchronise settlements of simulated FX swaps and issuance/redemption of simulated money market fund tokens, leveraging protocols to connect separate networks.
The partnership marked another evolutionary step in the acceleration of tokenisation in the capital markets, at a time when estimates on the scale of tokenisation expected in the next decade, have reached eye-watering levels.
Critical mass
As anyone would expect, the risk appetites and advancements of asset managers into crypto vary across the spectrum, but there’s a commonality in their appreciation of the tokenisation opportunity in front of them.
The scale of this is subject to degrees of divergence.
Boston Consulting Group estimates that the tokenisation of global illiquid assets could be a $16trn business opportunity by 2030.
In June 2024, however, McKinsey estimated that the total tokenised market capitalisation could reach around $2trn by that year (excluding cryptocurrencies like Bitcoin and stablecoins like Tether). McKinsey says this is a total that will be driven by adoption across mutual funds, bonds and exchange-traded notes, loans and securitisation, along with alternative funds. In a bullish scenario, this value could double to around $4trn, its report said.
It is possible that tokenisation is perceived across asset managers as one of the catalysts to access new segments and the next generation of high net-worth clients, to increase market share, and a route to product diversification. After all, a 2022 PwC survey of high net-worth investors, which explored their wealth management relationships and their appetite for non-traditional assets, found that 55% of respondents were investing in cryptocurrency assets and 66% wanted increased personalisation in their wealth management relationships.
Across 2024, this increasing demand and asset managers’ responses to it may have reflected a broadening appreciation among investors not just of the known benefits of blockchain, but also of the widening investment options.
One could even call it the beginning of the normalisation of blockchain deployment across global asset managers.
With every asset’s entire history of transaction details recorded in an immutable and verifiable manner, and this new ability to verify an asset’s authenticity, it’s easy to see why and how blockchains are reshaping fundamental aspects of the services asset managers provide.
Theoretically, the benefits from such a greater degree of automation, new distribution routes, improved liquidity, increased transparency and faster transactional processes through the use of smart contracts, should already be making a material difference for asset managers and investors.
2024 was also a year when the use of blockchains became not so much an area of innovation by a select few asset managers, but more a common pursuit among these companies to secure competitive advantage.
As is often the case with such pursuits though, more regulatory clarity is required before innovation can accelerate.
Regulation and evolution
Right now, there’s a contrast in apparent regulatory approaches towards cryptocurrencies in the UK and US. The UK is taking a slower, more cautious path as its watchdogs begin to wrap their arms around the infrastructure of digital assets, while the US President is tying crypto’s potential to a core policy platform.
Trump’s appointment of crypto enthusiast Paul Atkins as SEC chair was an encouraging sign for industry stakeholders across the Atlantic. The President has since appointed David O. Sacks as the “White House AI and crypto czar”, a role in which he will work on a legal framework to provide clarity for the US crypto industry.
In the UK – where the government is asking questions of financial services to bolster its economic growth mission – three developments have marked the regulatory direction of travel.
Early in 2024, the Financial Conduct Authority (FCA) approved the launch of crypto-backed exchange-traded notes for professional investors with strict parameters to shield retail investors. More recently, it set out a roadmap to bring the wider cryptocurrency industry into its regime.
In December, the FCA’s Discussion Paper DP24/4 started the industry conversation about the structure and approach of crypto regulation, but the whole undertaking won’t materialise in legislation until 2026 – possibly the latter part of that year.
Along with these direct actions by the regulator, the UK government has proposed a bill that seeks to categorise digital assets such as Bitcoin and non-fungible tokens (NFTs) as personal property under English and Welsh law.
Announcing the bill, the Ministry of Justice said it formed part of plans to ensure “Britain maintains its pole position in the emerging global crypto race”, in being the first country to recognise these assets in law.
What all this amounts to is a need for clarity for investment managers integrating digital assets into their core strategies – but this won’t emerge for around two years.
As use cases grow, UK asset managers are closely watching the increasing popularity of crypto-related ETFs in the US.
Trimmer at Abrdn believes a favourable regulatory environment will strengthen institutional interest in digital assets.
He added: “The outcome of the US election is expected to be positive for digital assets including the potential for broader adoption of public blockchain and the growth of tokenised assets.”
This sense of optimism about crypto for 2025 is fairly widespread.
Nathan Batchelor, head of trading at Biyond Trader, a cryptocurrency market intelligence platform, said his firm has observed a marked increase in interest from institutions and family offices seeking Bitcoin exposure following the launch of ETFs in 2024.
“The influx of substantial capital into ETFs provides fertile ground for quant traders and algorithmic strategies to excel,” he said.
Other commentators set out how the wider competitive landscape could evolve next year.
Jean Rausis, co-founder of decentralised finance ecosystem Smardex, believes that asset managers’ moves to turn traditional assets into digital tokens will likely bring a flood of money into the crypto markets, intensifying competition.
He added: “It’s like watching Wall Street and Silicon Valley start to merge; everyone’s racing to offer the coolest new digital investment products, from tokenised real estate to fancy blockchain tech.
“But it’s not just about making money; there’s a big push for clearer rules so everyone knows what they’re doing, and that it isn’t just the wild west of finance.”
Rausis predicted that in 2025, the industry could see big finance firms not just playing but setting the rules, while smaller, nimble crypto companies fight to keep their edge.
“It’s going to be an exciting, if somewhat chaotic ride,” he added.
Words of caution
For all the enthusiasm, however, there remain contrasting views as to whether the strategic moves by major asset managers signify the entry of cryptocurrencies into the mainstream. Some analysts think they already were.
Critics like JPMorganChase CEO Jamie Dimon are unmoved in their dismissive disdain of Bitcoin – though even his language has softened from wanting it closed down completely.
What is undeniable, is that, through 2024 and into 2025, cryptocurrencies, blockchain and tokenisation will undergo further inflection points as adoption and uptake grows.
