How Chainlink Powers TradFi Tokenization with Fidelity, Sygnum 

The trio’s alliance underscores the growing adoption of tokenization by traditional financial institutions.

Robot hand reaching Chainlink token in Chainlink's digital space.
Created by Kornelija Poderskytė from DailyCoin
  • Chain Link has forged a partnership with Fidelity International and Sygnum.
  • The trio’s alliance will enhance data accessibility and transparency.
  • Tokenization is gaining traction among traditional financial giants.

Over the past year, traditional financial institutions have increasingly turned to the blockchain industry, seeking to leverage its diverse features and better enhance their offerings. This pursuit has seen an increase in the use of blockchain technology for the tokenization of funds, aimed at breaking away from conventional record-keeping systems and enhancing data accessibility and transparency.

As the benefits of the integration become increasingly evident, two major financial institutions are joining the trend by collaborating with Chainlink, an Ethereum-based decentralized oracle.

Chainlink has announced a partnership with Fidelity International and global digital asset banking group Sygnum, aimed at bringing Net Asset Value (NAV) data on-chain. According to a Wednesday, July 3, 2024 release, the alliance will enhance transparency and accessibility of asset data, providing a major boost to the growing field of fund tokenization.

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The collaboration will use Chainlink Network’s ability to work across different blockchains and its real-time data updates to ensure that NAV data is accurately reported and updated both on the blockchain and other systems. Chainlink will also offer a flexible method for sharing NAV data, allowing it to securely spread across any blockchain or existing off-chain system.

As part of the initiative, Sygnum has issued an on-chain representation of Fidelity International’s $6.9 billion Institutional Liquidity Fund. Additionally, Sygnum has tokenized $50 million of Matter Labs’ company treasury reserves held in Fidelity International’s money market fund, issued on the ZKsync blockchain as part of the Chainlink SCALE program.

Chain Link co-founder Sergey Nazarov emphasized the significance of the collaboration in bridging the gap between traditional finance and the blockchain industry.

“The global reach and efficiency benefits of tokenized funds are far greater than traditional methods and will, over time, become the way the entire asset management industry operates,” he stated, acknowledging the growing trend of fund tokenization across the financial ecosystem. 

Experts Bet on Tokenization As the Next Big Thing

A May 2024 report by financial analytics firm S&P Global has highlighted the significant momentum in tokenized assets, asserting their potential to transform the existing financial markets. 

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S&P Global emphasized the key benefits attached to tokenized funds over traditional treasuries, such as greater liquidity and streamlined fund settlement. The firm added that tokenized treasuries are particularly witnessing heightened momentum, evidenced by their accelerated growth to over $1 billion in outstanding value. 

Mainstream financial institutions are increasingly recognizing the benefits of tokenized assets. Notable examples include Blackrock’s BUIDL fund, which was introduced in March this year and attracted over $240 million in investments within the same week of launch. BUIDL currently stands at $381 million, is built on the Ethereum blockchain, and allows investors to directly redeem their shares for USDC stablecoin.

Franklin Templeton’s FOBXX fund has similarly enabled peer-to-peer transfers of tokens on Stellar and Polygon blockchains, showcasing the growing acceptance of tokenized treasuries in the financial ecosystem.

On the Flipside

  • The United Kingdom government recently greenlit a game-changing proposal aimed at facilitating the tokenization of funds. 
  • The industry’s uneven regulatory standards, particularly with stablecoins, have been spotlighted as a potential roadblock to the broader adoption of tokenization. 

Why This Matters

The collaboration between Chain Link, Fidelity International, and Sygnum marks a significant step forward in integrating traditional finance with blockchain technology, paving the way for increased adoption and innovation across the asset management industry.

Discover  more about the recently published report on tokenization in this article:
Tokenized Treasuries Will Bring TradFi On-Chain: S&P Global

Regulatory standards for the local Nigerian crypto industry may be taking a U-turn; read this article to find out more:
Crypto in Nigeria Gets a Second Look as SEC Softens Stance 

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Grace Abidemi

Grace Abidemi, a cryptocurrency reporter at DailyCoin, covers industry developments and trends. She previously worked as a freelance writer. With a Bachelor's degree in German Language and certifications in marketing and storytelling, Grace creates engaging content. When not working, she's in Nigeria, mastering cooking and canvas painting, and enjoys learning about different cultures and languages.