The investment management industry is witnessing a pivotal moment in the evolution of digital finance. On January 21, 2026, F/m Investments, an $18 billion asset management firm, filed a groundbreaking application with the U.S. Securities and Exchange Commission seeking permission to tokenize shares of its US Treasury 3 Month Bill ETF (TBIL). This marks the first time an ETF issuer has explicitly sought SEC relief for tokenizing registered investment company shares on a permissioned blockchain ledger. The filing represents far more than a technical innovation—it signals a fundamental shift in how traditional securities could be traded, settled, and owned in the digital age, all while maintaining the regulatory protections investors have relied on for nearly a century.
Understanding the Tokenization of ETF Shares
At its core, tokenization converts traditional ownership interests into digital tokens recorded on a blockchain. In F/m Investments’ proposal, existing TBIL ETF shares would be represented on a permissioned blockchain ledger while maintaining the same CUSIP code, rights, fees, voting rights, and economic terms as conventional shares today. The key distinction here is critical: these tokenized shares would not exist as unregistered digital assets floating in the crypto wilderness. Instead, they would remain firmly within the regulatory framework of the Investment Company Act of 1940, preserving independent board oversight, daily transparency requirements, third-party custody, and comprehensive audit mechanisms.
Alexander Morris, CEO of F/m Investments, articulated the strategic imperative behind this application: “Tokenization is coming to securities markets whether we file this application or not. The question is whether it happens inside the regulatory framework investors have relied on for 85 years, or without that set of protections for investors.” This perspective underscores a crucial philosophy—rather than resisting technological change, the firm seeks to integrate blockchain innovation within established safeguards rather than abandon them entirely.
The Regulatory Pathway and Investor Protection
F/m’s application operates within Exchange Act Rule 19b-4, which requires self-regulatory organizations to notify the SEC of proposed rule changes. By pursuing an exemptive application rather than attempting to circumvent existing regulations, F/m has chosen the path of regulatory compliance and transparency. If granted, the relief would allow TBIL to support both traditional brokerage infrastructure and digital-native, token-aware trading platforms through a single share class.
This regulatory approach addresses a fundamental concern that distinguishes F/m’s proposal from unregistered digital tokens or stablecoins. Unlike these alternatives, which cannot guarantee backing by traditional assets and lack independent oversight, tokenized TBIL shares would maintain:
- Independent board oversight and governance
- Daily portfolio transparency and reporting
- Third-party custody and safekeeping
- Full regulatory compliance under 85 years of securities law
- Protection from the risks inherent in “in the wild” tokens
This structure represents a deliberate effort to marry technological innovation with investor protection, creating what Morris describes as an “on-ramp” into blockchain-enabled securities markets.
Operational Benefits and Market Efficiency
The tokenization of TBIL shares promises significant operational advantages that extend beyond mere technological novelty. By recording ownership on blockchain infrastructure, the initiative could enable several transformative capabilities for the securities industry.
Settlement speed represents one of the most compelling benefits. Traditional securities settlement operates on a T+1 or T+2 basis, meaning transactions settle one to two business days after execution. Blockchain-based settlement could compress this timeline to near-instantaneous execution, dramatically reducing counterparty risk and capital lockup. This efficiency gain carries particularly significant implications for high-volume institutional traders and treasury markets, where speed and precision directly impact operational costs.
Extended trading hours become feasible when ownership is recorded on blockchain infrastructure. Unlike traditional markets constrained by exchange operating hours, permissioned blockchain networks can facilitate 24/7 trading windows, accommodating global investors across different time zones and enabling continuous price discovery in international markets.
Fractional ownership also becomes more practical and cost-effective through tokenization. Blockchain infrastructure naturally supports granular asset divisions without the administrative overhead that fractional shares incur in traditional settlement systems. This democratizes access to institutional-grade treasury products for investors seeking smaller positions.
The Broader Industry Context
F/m’s application arrives amid accelerating industry momentum toward blockchain-based securities infrastructure. The Depository Trust Company (DTC), which serves as the backbone of U.S. securities settlement, received SEC approval for a tokenization pilot program permitting participants to transfer tokenized security entitlements of certain eligible securities on qualifying blockchains. This DTC initiative encompasses highly liquid securities including Russell 1000 constituents, US Treasuries, and major index-tracking ETFs.
Additionally, major exchanges including Nasdaq have announced competing tokenization initiatives, signaling broad recognition that blockchain infrastructure will become integral to capital markets infrastructure. The SEC’s approval of generic listing standards for commodity-based ETPs also demonstrates regulatory willingness to adapt frameworks for evolving market structures, creating a more favorable environment for F/m’s application.
The tokenized US Treasury market has already grown to $9.57 billion in notional value, indicating significant institutional appetite for this asset class. F/m’s initiative could accelerate adoption by providing a regulated pathway through which traditional asset managers can participate in tokenized markets without abandoning investor protection principles.
Technical and Operational Safeguards
F/m’s proposal incorporates multiple technical safeguards designed to prevent fraud, ensure custody integrity, and maintain audit trails. The permissioned nature of the blockchain means that access is restricted to authorized participants, eliminating the open-access characteristics that raise regulatory concerns in public blockchain networks.
If SEC approval is granted, conventional book-entry ETF shares and tokenized shares would be exchangeable on a one-for-one basis, providing investors with flexibility to move between settlement systems according to their preferences and operational requirements. This flexibility ensures that adoption of tokenization remains voluntary rather than mandatory, protecting investors who prefer traditional settlement methods.
Looking Forward: Implications for Asset Management
The significance of F/m’s filing extends beyond the specific case of TBIL shares. If approved, this application could establish a regulatory template for other asset managers seeking to tokenize ETF shares while maintaining full Investment Company Act protections. This precedent-setting nature underscores why regulatory observers across the financial industry are closely monitoring the SEC’s response.
Success would demonstrate that blockchain technology can enhance securities markets without undermining investor protection. It would validate a regulatory model that embraces innovation through established frameworks rather than requiring entirely new regulatory structures. This approach contrasts sharply with unregulated digital asset markets, where innovation frequently outpaces regulatory capability, creating gaps in investor protection.
The approval would also position F/m as a pioneer in mainstream digital securities, potentially attracting competitors to pursue similar applications and accelerating the industry-wide transition toward blockchain-based settlement infrastructure.
F/m Investments’ application represents a watershed moment for traditional asset management. By seeking SEC permission to tokenize ETF shares within existing regulatory frameworks, the firm has chosen a path that honors both technological innovation and investor protection. Whether the SEC grants this request will significantly influence whether blockchain’s transformative potential reaches mainstream asset management within protective regulatory guardrails, or whether tokenization advances outside traditional structures entirely. For investors, regulators, and the financial industry broadly, the stakes of this application—and the SEC’s response—could define how digital securities markets evolve for decades to come.
