F/m Investments Seeks SEC Approval to Tokenize Shares of ETF

TLDR

• F/m Investments is seeking SEC approval to tokenize shares of its U.S. Treasury 3 Month Bill ETF.
• The company plans to record ownership of the ETF on a permissioned blockchain ledger.
• F/m Investments believes it is the first firm to request SEC approval for tokenized shares of a registered investment company.
• Tokenized shares will retain the same rights, fees, voting rights, and economic terms as existing shares.
• The tokenization will occur under the same CUSIP code as the traditional ETF shares.

F/m Investments is seeking approval from the U.S. Securities and Exchange Commission (SEC) to tokenize shares of one of its exchange-traded funds (ETFs). The $18-billion ETF issuer plans to record ownership for its U.S. Treasury 3 Month Bill ETF (Nasdaq: TBIL) on a permissioned blockchain ledger. This move marks a potential first for the industry, as the firm aims to become the first to tokenize shares of a registered investment company.

F/m Investments’ Proposal for Tokenization

F/m Investments is requesting SEC relief to tokenize its TBIL ETF shares, which would be represented on a blockchain. The company believes that this is the first time a firm has sought such approval for tokenized shares of a registered investment company. CEO Alexander Morris commented that the tokenization of traditional financial instruments is inevitable and that the SEC’s decision could set a precedent.

The company’s proposal promises that the tokenized shares will retain the same rights, fees, voting rights, and economic terms as the existing shares of TBIL. This will occur under the same CUSIP (Committee on Uniform Securities Identification Procedures) code. Unlike unregistered digital tokens or stablecoins, F/m Investments assures that their tokenized shares will remain fully backed by traditional assets, remaining within the Investment Company Act of 1940.

Regulatory Landscape and Industry Interest

F/m Investments’ filing is one of the first significant attempts to integrate blockchain technology into traditional securities. The firm has promised transparency, daily updates, third-party custody, and audits to ensure the security of tokenized assets. While the regulatory framework for tokenized securities remains unclear, lawmakers and financial regulators have shown an interest in exploring this area.

The New York Stock Exchange recently announced its plans to develop a platform for trading tokenized U.S. equities and ETFs, pending regulatory approval. This development further reflects the growing interest in blockchain technology as a tool for revolutionizing traditional financial systems.

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