F/m Investments Moves to Tokenize ETF Shares, Seeks U.S. SEC Approval

U.S. ETF manager F/m Investments has formally applied to the Securities and Exchange Commission (SEC) for approval to tokenize exchange-traded fund (ETF) shares on a blockchain. If approved, it would mark the first instance of tokenizing shares of a registered ETF.

According to The Block on the 21st (local time), F/m Investments submitted a request for regulatory relief and approval to the SEC to pursue share tokenization for its 3-month U.S. Treasury ETF, “TBIL.” The structure would record ownership of the ETF on a permissioned blockchain ledger.

F/m Investments said the filing is the first case in which a formal request for regulatory relief has been made to the SEC to tokenize shares of a registered investment company. The firm added that it is focused on using blockchain as a means of recording ownership while keeping the existing ETF structure intact.

Alexander Morris, CEO of F/m Investments, said the tokenization trend is inevitable. He stressed that existing investor rights would not change even if ETF shares are tokenized. The company explained: “If approved, the existing shares of the TBIL ETF will be represented on a permissioned ledger while maintaining the same CUSIP and rights, fees, voting rights, and economic terms.”

F/m Investments drew a clear distinction between this structure and stablecoins or unregistered digital tokens. It emphasized that tokenized ETF shares would remain within the framework of the Investment Company Act of 1940, and that board oversight, daily disclosures, as well as third-party custody and audit arrangements would be maintained as they are.

Interest in tokenizing ETFs and stocks is spreading across traditional finance. The New York Stock Exchange (NYSE) is developing a platform to support on-chain trading and settlement of tokenized U.S. stocks and ETFs, subject to regulatory approval.