In the consistently evolving world of finance, the tokenization of funds has emerged as one of the most promising asset classes to digitize onchain. By bringing traditional funds, including private equity, ETFs, and hedge funds onto blockchain-native formats, tokenizing funds presents a paradigm shift, one geared towards more streamlined, secure and scalable financial operations. 

‍This article explains what the tokenization of funds is, explores why it’s a suitable use case for blockchain, plus the unique value propositions and benefits that exist when tokenizing funds on MANTRA Chain. 

The Definition of a Fund 

Put simply, a fund is an organized structure. Often a legal entity such as a limited partnership, trust, or corporate vehicle, that collects capital from multiple investors and deploys that capital into assets in line with the fund’s stated mandate. These assets often include equities, credit, real estate, startups, and commodities. Investors share in the profits, losses, and distributions based on their proportional ownership. 

Tokenization and Funds 

Tokenization converts a real world financial instrument or asset into a digital token on a blockchain, thereby enabling fractional ownership, programmable rules, and automated compliance. 

You can read more about tokenization here.  

Historically investment funds have suffered from a lack of liquidity, high barriers to entry and are laden with manual processes. Traditionally asset managers have only found it economically attractive to accept a limited number of large-ticket investments into their funds owing to the cumbersome nature of onboarding. Moreover, the end-to-end process undertaken from inception, set up, fundraising, onboarding, operation, liquidity and fund closing, entails a considerable number of touchpoints that take place in a highly manual, bespoke manner with multiple reconciliation points along the way. The complexity of which results in higher costs and slower settlement times, often hindering the fund manager’s ability to expand their offering to a broad set of investors. 

At its core the tokenization of funds can enable the creation of a shared platform and workflow that enables more seamless, automated processing, settlement, ownership tracking, and data management. 

To date, money market funds, mutual funds that invest in high-quality, short-term debt instruments, cash and cash equivalents, have been the focal point of most tokenized fund activity. Tokenized money market funds (MMFs) see traditional low-risk assets, like U.S. Treasury bills and cash, represented as digital tokens on a blockchain. Each token corresponds to a share of the fund, allowing investors to buy fractional portions. This makes it easier to access these funds with less capital, opening the door to broader participation. 

A key example being the BlackRock USD Institutional Digital Liquidity Fund (BUIDL). Issued initially on Ethereum, Blackrock’s flagship fund invests in cash equivalents like U.S. Treasury bills and repurchase agreements. In March 2025, BUIDL crossed $1 billion in AUM. It is now accepted as collateral on Deribit and Crypto.com, demonstrating it has expanded its utility beyond passive yield.

Current Barriers and Future Benefits Through Fund Tokenization 

Tokenized funds offer the same benefits as traditional ones - low-risk investments that aim to preserve capital and provide steady returns - but are boosted by additional advantages provided from blockchain technology. Here's a break down of the current barriers, as well as the solutions.

1. Private funds lock capital for years, making early exits difficult.

Tokenized fund shares can be traded onchain with compliance controls. Investors gain flexible, near-instant liquidity while remaining fully compliant.

2. Traditional reporting relies on manual reconciliation and back-office processing, which is slow and prone to errors. Wire transfers and admin delays slow capital movements. Investors rely on quarterly or delayed reporting.

Token transfers are executed instantly onchain, with smart contracts automatically enforcing compliance and ownership rules. This automation minimizes delays, errors, and the reliance on manual processes. Smart contracts and oracles enable real-time updates for Net Asset Value (NAV), cash-flow tracking, and automated reporting, significantly enhancing trust and oversight.

3. Most institutional funds have high barriers to entry, like $100k+ minimum investments, which excludes many investors.

Tokenization enables fractional ownership, lowering the entry barrier and democratizing access to private funds.

4. Cross-border investing can be complex due to jurisdictional rules.

With VARA-regulated VASP integration, MANTRA Chain supports global, compliant investor onboarding, making international participation seamless.

‍5. KYC/AML, tax forms, and subscriptions are slow and error-prone.

Built-in compliance smart contracts automate KYC whitelisting, eligibility checks, and transfer restrictions, thereby reducing manual admin work.

6. Multiple intermediaries add fees and friction.

By eliminating unnecessary middlemen with programmable smart contracts, operational costs and settlement fees are minimized, improving net returns.

7. Investors rely heavily on managers, administrators, custodians and banks which carries risk.‍

‍Onchain governance and custody reduce dependency on centralized intermediaries, making operations more secure and auditable.

8. Capital can sit idle waiting for manual processes.

Tokenized subscriptions allow instant capital commitment and allocation, accelerating fund deployment.

9. Secondary trades are manual and illiquid.

Tokens can be traded on compliance-gated secondary markets, unlocking liquidity and price discovery previously unavailable in private markets.‍

10. Capital calls are unpredictable and are usually issued with short notice, making it difficult and stressful for investors to manage their liquidity.

Smart contracts can automatically trigger and settle capital calls, removing the need for manual coordination or reconciliations. Investors can temporarily allocate committed capital into liquid, yield-generating tokenized assets until the fund actually requires the money. When the fund issues a call, a smart contract automatically redeems those liquid tokens and transfers the proceeds to satisfy the commitment.

The Benefits of Tokenizing Funds on MANTRA Chain and with MANTRA

MANTRA Chain is the first true MultiVM Layer 1 built for real world assets, supporting both EVM and CosmWasm smart contracts. This architecture enhances security and scalability while allowing developers and institutions to use familiar tools, making it easier to bring traditional assets, like private credit, onchain and provide global investors with transparent access.

With MANTRA Finance’s VASP license from Dubai’s VARA, the chain can compliantly serve the growing tokenization market. Institutions can integrate seamlessly, meeting regulatory requirements across multiple jurisdictions.

MANTRA’s decentralized identity (DID) system enables secure, reusable KYC/AML verification, simplifying the issuance and scaling of regulated credit products while reducing compliance costs.

The network is secured by a sovereign cohort of institutional validators - including Google Cloud, Anchorage Digital, Nansen and Ledger - offering institutional clients secure custody, staking, and confidence in network integrity.

The Last Word 

The tokenization of funds represents a foundational shift in how capital is formed, managed and accessed. By moving fund operations onchain, asset managers can unlock unprecedented efficiency, transparency and automation - thereby reducing operational drag while expanding global investor access. Investors benefit from improved liquidity, real time reporting, low barriers to participation, and a more secure, interoperable financial infrastructure. 

Regulatory aligned blockchain networks like MANTRA Chain, present an opportunity for traditional funds to pivot, and transition their operations, thereby reshaping the future of asset management, and enabling a more open, efficient and programmable investment ecosystem. 

Enquiries about tokenizing funds on MANTRA Chain can be submitted here.