WisdomTree Set To Launch Digital Fund With Real-world Focus

A key narrative in the long-term bullish case for crypto adoption is the prospect of tokenizing off-chain assets to enable more efficient global markets.

In that vein, WisdomTree is set to launch a fund that digitizes its fund share ownership record on the Ethereum or Stellar blockchains as the asset manager seeks to ultimately move more traditional financial assets onto digital rails.  

Regulators have approved WisdomTree’s Short-Term Treasury Digital Fund (WTSY), the firm has revealed, which seeks to track the Solactive 1-3 Year Treasury Bond Index by investing in short-term US Treasury obligations.

The fund does not invest in crypto directly. But the asset manager is betting that the offering is a first step toward bringing traditional financial assets, like US Treasury bonds, into the digital ecosystem and unlocking ways for blockchain rails to improve investor experience.

WisdomTree, with roughly $75 billion in assets under management, first filed for the fund in April 2021. An open-ended registered fund under the Investment Act of 1940, WTSY is like a traditional mutual fund. Where it differs is that its transfer agent — Securrency Transfers — keeps a secondary record of the fund’s share ownership on either the Stellar or Ethereum blockchains.

Though the WisdomTree fund cannot support anonymous transactions, an investor would be able to make an approved transaction on their own and hold the record of the share in a supported blockchain wallet, Will Peck, WisdomTree’s head of digital assets, said in a Monday blog post. 

Peck highlighted near-instant settlement finality around the clock and atomic settlement that a blockchain provides, as well as the code-based enforcement of rules in financial processes. 

“These features will take time to unlock and may not come to fruition with respect to the fund, but we are seeking to get there,” he said.

Peck called WTSY the first digital-registered fund with multichain interoperability. He added that bridging the gap between traditional finance and blockchain is a critical step in improving the investor experience over time. 

“Many of the world’s biggest financial institutions agree that there is a growing movement to make tokenized assets and digital funds a part of day-to-day ‘traditional’ financial services,” Peck told Blockworks.

“We’re truly an early mover here in the registered fund space, and we think our multichain functionality enables a lot of these use cases,” he said.

Nicole Olson, a vice president of digital product development and innovation at State Street Digital, told Blockworks last month that tokenization is among the company’s biggest focuses. 

Sumit Roy, crypto editor and analyst for ETF.com, previously told Blockworks that the WisdomTree fund shares record being available on the blockchain is “a glimpse of the future.” Though it’s conceivable for a fund shares’ official record to live on the blockchain one day — allowing investors to trade their shares peer-to-peer — there are regulatory hurdles to get past first, he added. 

The fund is expected to launch through WisdomTree Prime’s digital wallet application, which is currently in beta testing. 

The company first revealed plans for the app in January. WisdomTree Prime is designed to allow users to save, spend and invest in cryptoassets such as bitcoin and ether, blockchain-enabled funds and tokenized versions of physical assets.

WisdomTree CEO Jonathan Steinberg has said he expects all financial assets to eventually move onto blockchain infrastructure, and that he intends for the company to be a leader in that segment. 

Peck declined to comment on specific digital product plans going forward.

“We have said in the past that we want to be a leader in passive investing on blockchain,” he said. “We have strong indexing and research capabilities across asset classes, and we look forward to future product development in this wrapper.”

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