Preface

Context:

Giselle Lai, director and digital assets strategist for APAC at Fidelity International, argues that the most meaningful long-term application of tokenized funds for large institutions is not merely round-the-clock liquidity but improved balance-sheet management. This article explains why tokenized money market funds and other on-chain instruments could help pension funds, insurers and corporations use cash across fragmented accounts and jurisdictions more efficiently. It summarizes the current state of tokenized products, their appeal to institutional treasuries, and why a full ecosystem for balance-sheet management will likely take decades to develop.

Lazy bag

Tokenization’s strongest institutional case lies in the ability to manage global cash and collateral more efficiently. Rather than focusing only on 24/7 trading, large organizations can use tokenized instruments to shift liquidity between accounts and jurisdictions, earn continuous yield, and reduce operational friction. Adoption exists today—mainly through tokenized money market funds—but a comprehensive balance-sheet management ecosystem will evolve slowly over years.

Main Body

The rise of tokenized financial products has generated widespread attention, often framed around notions of instant settlement, fractional ownership, and always-on liquidity. Those features are compelling, and they are driving adoption among retail traders and certain institutional participants. But according to Fidelity International’s Giselle Lai, the deeper, longer-term value of tokenized funds for large, global institutions such as pension funds, insurers and multinational corporations resides in a different capability: more efficient balance-sheet management.

Large institutions routinely hold cash and liquid assets across multiple bank accounts and jurisdictions. This fragmentation is driven by regulatory compliance, currency risk management, custodial arrangements and the operational realities of doing business globally. Cash sitting in many of these accounts often earns minimal or no return while institutions maintain liquidity buffers to meet liabilities and regulatory requirements. Moving those balances between countries and accounts quickly and cost-effectively is operationally complex, resource-intensive and sometimes constrained by banking hours and settlement processes.

Tokenized instruments—real-world assets represented on blockchain ledgers—offer properties that can address many of these frictions. They can move across systems near-instantly, support fractional ownership and earn yield continuously. For corporate treasuries and institutional balance-sheet teams, these properties translate into practical advantages: the ability to deploy idle cash more effectively, to reallocate collateral on demand across jurisdictions, and to reduce the operational friction of managing multiple deposit relationships.

Tokenized money market funds have emerged as the most visible use case so far. Backed largely by government securities such as U.S. Treasuries, these funds provide familiar exposure but with the advantages of tokenization: quicker transfers, fractionalized positions, and integration with on-chain liquidity rails. Since early 2024, several large products have launched, and tokenized money market funds now represent a meaningful slice of the burgeoning on-chain real-world-asset market. That traction demonstrates institutional demand for always-available yield and the ability to shift collateral efficiently.

However, Lai stresses that institutions are not necessarily asking for tokens themselves; they are asking for the capabilities tokens enable. In other words, the value proposition is functional: faster asset movement, lower friction, continuous yield accrual, and improved capital efficiency. Tokenized funds can be an operational tool that complements existing balance-sheet strategies rather than forcing wholesale replacements of treasury models.

Despite the attractive properties, building a resilient, comprehensive ecosystem for balance-sheet management using tokenized assets will not happen overnight. Lai draws a parallel with the evolution of exchange-traded funds, which took nearly two decades to become a deep, widely integrated market infrastructure. Tokenization will likely follow a similar multi-year trajectory, requiring regulatory clarity, interoperability between platforms, institutional custody solutions, robust settlement and reconciliation processes, and broad industry standards to manage counterparty, custody and operational risk.

Moreover, the regulatory and institutional risk environments vary by jurisdiction. For pensions and insurers—entities subject to strict governance and liability-matching constraints—adoption will be measured and conservative. Integration with existing treasury systems, auditability, transparency of holdings and clear legal frameworks for tokenized claims are necessary prerequisites for broad-scale institutional uptake.

Market estimates point to substantial long-term growth. Tokenized markets—spanning money market funds, tokenized bonds, alternative assets and other real-world assets—are already measured in tens of billions of dollars and projected by some research firms to expand dramatically over the coming decade. Whether the expansion reaches optimistic scenarios depends on many factors, including standard-setting, custodial progress, and the ability of tokenized instruments to plug into existing institutional workflows without unacceptable trade-offs.

For now, practitioners and institutional product teams are focused on pragmatic pilot use cases. Treasury teams seeking greater agility for liquidity deployment may experiment with tokenized cash equivalents and funds to move collateral or cash between entities and accounts more quickly than current banking rails allow. These pilots illuminate operational benefits and surface areas where legal, tax and accounting treatment must be clarified.

In short, tokenization offers a suite of functional improvements that align with institutional priorities: efficiency, capital optimization and responsiveness. While 24/7 liquidity and instant settlement are headline-grabbing features, Lai’s view reframes tokenization as a tool for balance-sheet optimization—a shift that better matches the priorities of pensions, insurers and large corporates. Achieving that vision will take time, concerted industry effort and the kind of ecosystem development that previously took decades in adjacent markets. But given the potential operational gains, the gradual build-out of tokenized balance-sheet tools is a likely and important frontier for institutional adoption.

Key Insights Table