For pension funds, tokenization’s real play is balance-sheet management, Fidelity’s Lai says

Giselle Lai, director and digital assets strategist for APAC at Fidelity International, emphasized that the most significant long-term benefit of tokenized funds for large global institutions lies in balance-sheet management rather than solely in 24/7 liquidity. Institutions such as pension funds, insurers, and corporations often maintain cash across multiple bank accounts worldwide to meet regulatory requirements and manage currency risks, but these deposits typically generate little to no return. Tokenized money market funds and similar onchain structures can help these organizations move cash more efficiently across fragmented accounts, offering continuous yield and better integration with liquidity needs without requiring a fundamental change to existing strategies.

Tokenized money market funds are currently the most established category in this space, largely backed by U.S. Treasuries, with assets under management exceeding $15 billion. The total market for onchain real-world assets outside stablecoins has reached over $31 billion, while the broader global asset tokenization market—including alternative investments and tokenized financial infrastructure—is valued at around $2.1 trillion. Projections vary, but some forecasts expect this market to grow significantly, potentially reaching $24.5 trillion by 2033 or even $88 trillion by 2035, driven by advantages such as instant execution, fractional ownership, and lower transaction costs.

Despite the appeal of continuous trading, Lai noted institutional investors prioritize token qualities that enhance asset management speed and cost-effectiveness over simply gaining access to token ownership. This explains the rapid adoption of tokenized money market funds by stablecoin issuers and firms seeking always-on yield and collateral flexibility. Lai also highlighted that tokenization’s development into a comprehensive ecosystem akin to what ETFs have achieved will require time, possibly spanning two decades, reflecting the gradual evolution of new financial infrastructures.

Overall, the discussion underscores how tokenization could transform institutional balance-sheet tactics by providing more fluid, cost-efficient tools for managing dispersed cash holdings across jurisdictions. While trading ease and liquidity remain attractive features, the true value for large institutions may emerge from improved capital efficiency and operational flexibility enabled by tokenized assets. The pace of adoption and maturation will depend on industry collaboration and regulatory progress in this evolving digital asset landscape.