Fidelity’s U.S. Treasury Fund “OnChain” on Ethereum carries Significant Implications

Fidelity Investments, a major U.S.-based asset manager, has filed with the Securities and Exchange Commission (SEC) to register a tokenized version of its Fidelity Treasury Digital Fund (FYHXX), dubbed the “OnChain” share class. This fund, which primarily holds U.S. Treasury securities and cash, will leverage the Ethereum blockchain for enhanced transparency and transaction tracking. The filing indicates that, pending regulatory approval, the product is expected to become effective on May 30, 2025.

This move aligns Fidelity, managing approximately $5.8 trillion in assets, with other financial giants like BlackRock and Franklin Templeton, who are also exploring blockchain tokenization for traditional financial instruments. The OnChain class aims to provide verifiable tracking of share transactions, though Fidelity will maintain traditional book-entry records as the official ownership ledger. Fidelity’s move, as a $5.8 trillion asset manager, further legitimizes blockchain technology in traditional finance (TradFi).

It follows similar steps by BlackRock (with its tokenized money market fund) and Franklin Templeton, suggesting a growing trend among institutional heavyweights. Tokenizing a Treasury fund on Ethereum—a blockchain synonymous with decentralized finance (DeFi)—could pave the way for greater interoperability between centralized financial systems and decentralized ecosystems, potentially unlocking new use cases like collateralization in DeFi protocols.

The use of Ethereum for “verifiable tracking of share transactions” introduces real-time visibility into ownership and transfers, which could reduce settlement times compared to traditional systems (e.g., T+1 or T+2 in securities markets). Blockchain-based record-keeping might lower operational costs by reducing reliance on intermediaries like custodians or transfer agents, though Fidelity’s dual system (blockchain plus traditional records) suggests a cautious hybrid approach for now. The filing’s success hinges on SEC approval by May 30, 2025. This will test regulators’ stance on tokenized real-world assets (RWAs), potentially setting a precedent for future tokenized funds.

Fidelity’s decision to maintain traditional book-entry records as the official ledger indicates a pragmatic effort to comply with existing securities laws, which may not yet fully accommodate blockchain-native ownership. Tokenization could eventually democratize access to Treasury funds, allowing fractional ownership or integration with digital wallets, though the initial OnChain class may target institutional or accredited investors. While blockchain adds transparency, investors unfamiliar with Ethereum might perceive risks (e.g., smart contract vulnerabilities or network outages). Fidelity’s reputation could mitigate these concerns, but it’s a new frontier for conservative Treasury fund buyers.

Fidelity’s entry into tokenized funds intensifies competition with BlackRock, Franklin Templeton, and others, potentially accelerating innovation in asset management. Smaller fintechs or crypto-native firms might also feel pressured to scale or partner with TradFi giants. Choosing Ethereum over alternatives (e.g., Solana, Polygon, or private blockchains) reinforces its dominance in institutional tokenization, boosting its credibility and possibly its native token (ETH) value. Treasury funds thrive in high-interest-rate environments. If rates remain elevated or rise by May 2025, demand for tokenized versions could grow.

This move blurs the line between traditional securities and digital assets, potentially influencing how regulators classify and tax tokenized products in the future. Fidelity’s OnChain Treasury Fund could catalyze broader blockchain adoption in finance, streamline operations, and reshape investor access—assuming regulatory hurdles are cleared. It’s a calculated step toward a hybrid financial future, balancing innovation with the stability TradFi demands. Expect ripple effects across markets, technology, and policy if it goes live as planned.