Fidelity’s Lai highlights tokenization benefits for pension funds

Fidelity Investments is making the case that tokenization isn’t just a crypto buzzword. For pension funds managing enormous pools of long-duration assets, the technology could fundamentally reshape how balance sheets are managed.

The argument is straightforward: pension funds deal with illiquid assets, slow settlement cycles, and rigid capital structures that make portfolio rebalancing difficult. Tokenization, in Fidelity’s view, offers a way to make those balance sheets more nimble without abandoning the underlying asset classes that pensions depend on.

What Fidelity is actually building

Fidelity launched the Fidelity Treasury Digital Fund, known by its ticker FYOXX, in 2025. The fund is primarily invested in US Treasuries, with a twist: its on-chain share class records ownership on the Ethereum blockchain.

The on-chain class integrates with established book-entry systems, adding programmability and transparency to ownership records while keeping the existing financial plumbing intact.

Fidelity has also been staffing up around the initiative. The firm sought a digital asset strategist in 2025 specifically focused on tokenization and expanding the distribution of tokenized products within its digital asset management division.

Why pension funds specifically

Tokenization addresses pension fund constraints in a few ways. First, fractional ownership of traditionally illiquid assets means pension allocators could theoretically adjust positions in real estate or private credit without waiting for a full asset sale. Second, faster settlement times reduce counterparty risk. Third, on-chain records provide real-time transparency into portfolio composition, which matters when reporting to regulators and beneficiaries simultaneously.

The broader tokenization landscape

Fidelity isn’t operating in a vacuum. BlackRock launched its own tokenized Treasury fund, BUIDL, which became one of the fastest-growing products in the space. Franklin Templeton has been running a tokenized money market fund since 2021.

Fidelity’s own industry analysts have predicted that adoption will be gradual and concentrated in specific market niches rather than arriving as a sweeping transformation.

What this means for investors

The risk side of the equation deserves attention. Tokenized assets are still subject to the same underlying market risks as their traditional counterparts. The technology layer adds smart contract risk and potential regulatory uncertainty that pension fund allocators will need to price in.