Wall Street’s Digital Shift Speeds Up as BlackRock and Brevan Howard Funds Move to Blockchain
Abu Dhabi-based KAIO brings tokenization to the Sei Network, intensifying the race to digitize global finance.
Wall Street’s march into blockchain took another big step this week. KAIO revealed in Abu Dhabi that it has tokenized BlackRock’s ICS US Dollar Liquidity Fund and the Brevan Howard Master Fund on the Sei Network. The move opens the door for institutional investors to settle trades on digital rails once thought of only as futuristic experiments.
By placing billions of dollars’ worth of strategies on-chain—ranging from money markets to hedge funds—KAIO is pushing the financial system closer to a new era. For treasurers and fund managers juggling liquidity challenges, the announcement is less about buzzwords and more about practical options in an increasingly crowded field of digital infrastructure providers.
The Race for the Digital Storefront
The timing isn’t random. Just two weeks ago, Securitize rolled out Apollo’s ACRED private credit fund on the very same network. Meanwhile, BlackRock’s BUIDL fund already topped $1 billion on Ethereum, and Franklin Templeton continues spreading its FOBXX fund across multiple chains.
KAIO’s arrival on Sei highlights one thing: this market is moving fast. Whoever can build the most complete product lineup—whether it’s money market funds for cash management, hedge funds for growth, or credit products for yield—will win over institutional clients. As one strategist put it, “Technology is table stakes. What really matters is the breadth of compliant, liquid products and the confidence to use them.”
How It Actually Works
These tokenized funds don’t just sit on a public blockchain for anyone to trade. Instead, they run through feeder structures. Qualified investors receive tokens representing shares in the underlying funds, but transfers happen only between wallets that clear strict KYC and compliance checks.
The benefit? Institutions get instant settlement, automated reporting, and the ability to use fund tokens as programmable collateral in approved decentralized finance platforms. But unlike cryptocurrencies, this market stays gated. Only pre-approved participants get access—think of it as a private club for serious players.
Sei’s technology adds another layer. Its parallelized processing and sub-second finality suit high-speed financial applications. It also now taps into Chainlink’s Data Streams to deliver low-latency pricing, which helps funds keep net asset values in sync across platforms.
The Catch: Old Rules Still Apply
Speed is great, but traditional fund rules still dominate. Redemptions don’t magically speed up just because settlement happens on blockchain. Funds still follow NAV cycles, redemption calendars, and liquidity gates. Hedge funds with complex instruments remain especially tied to their old processes.
Liquidity in the secondary market is also thin. Yes, you can move tokens quickly between approved wallets, but if you want to fully cash out, you’re bound by the same paperwork and timelines as before. And legally, the “real” ownership record remains off-chain with transfer agents and registries. The blockchain token acts as a wrapper, not the final word in a dispute.
Where Tokenization Shines
The real payoff shows up in treasury and collateral operations. For example, institutions already use BlackRock’s BUIDL tokens as collateral in crypto derivatives trades. It’s efficient and keeps exposure safe in a money market fund.
Now, by bringing ICS fund tokens onto Sei, treasuries can automate sweep accounts, post shares as collateral in lending markets, and cut reconciliation delays. That means lower costs and more efficient use of capital. Industry insiders expect permissioned lending markets—similar to Aave but restricted to institutions—to pop up soon, using tokenized fund shares as their main collateral.
Abu Dhabi’s Advantage
KAIO operates under Abu Dhabi Global Market’s regulatory umbrella, which blends flexibility with credibility. This balance gives global asset managers confidence to experiment without crossing regulatory red lines.
That matters for complex products like Brevan Howard’s Master Fund. Such funds come with side pockets, gates, and heavy reporting duties. Showing that these structures can be faithfully mirrored on blockchain—with compliance intact—is a significant milestone in the journey toward digitized finance.
Too Many Chains, Too Little Liquidity
The industry faces a fragmentation problem. BlackRock’s BUIDL runs on Ethereum, Franklin Templeton spreads across multiple chains, and now KAIO is active on Sei. Liquidity and infrastructure get divided across platforms, forcing investors to deal with bridges, oracles, and cross-chain dependencies.
And these dependencies bring risks. If an oracle fails, a bridge glitches, or a blockchain pauses, settlement could grind to a halt. Right now, fallback procedures are often unclear, so cautious institutions keep positions small until standards mature.
What It Means for Investors
For treasury teams, tokenized money market funds provide safer, yield-bearing alternatives to parking stablecoins. But liquidity still ties back to fund schedules, not blockchain speed.
Hedge funds may find opportunities in using these tokens for cross-margin strategies or collateral in derivatives, especially with NAV-linked oracles ensuring accuracy. But operational risks mean early adoption will remain modest.
Banks, brokers, and custodians, however, need to act now. Those that establish frameworks and integrations early will gain a first-mover advantage as more funds tokenize. Analysts already expect Sei’s tokenized product menu to expand by 2026, along with institutional-only lending protocols and stablecoin reserve strategies tied to these funds.
The risk of disruptions—from technical hiccups to legal ambiguities—remains high. Yet each incident will likely push the industry toward clearer standards and stronger fallback systems.
A Gradual, Not Radical, Shift
KAIO’s announcement doesn’t flip Wall Street on its head overnight. Traditional fund infrastructure works well and has for decades. Blockchain adds efficiency, composability, and some cost savings, but not a revolution.
The biggest beneficiaries will be large institutions that can harness programmable settlement and automated treasury operations. Retail investors won’t see much of this—it’s intentionally walled off.
In reality, finance is moving toward a multi-chain world, where different blockchains serve different purposes: one for fast trading, another for treasury, another for cross-border settlement. The question isn’t whether blockchain will dominate but how institutions choose which rails to ride for which tasks.
The future of tokenized funds will depend less on tech promises and more on how comfortable risk committees feel integrating them into old systems. The infrastructure exists. Now it’s about adoption, trust, and execution.
Disclaimer: This article reflects information available at the time of publication. Past performance is no guarantee of future results. Investors should seek professional advice before making financial decisions. Access to tokenized funds remains limited by regulations and investor eligibility.