Mike Novogratz, founder and chief executive of Galaxy Digital Holdings, said that every asset manager that the digital asset firm has spoken to is working “frantically” on tokenizing a fund.

Novogratz took part in a fireside chat at the Barclays Annual Global Financial Services Conference on 11 September 2024 in  New York.

“There is no difference between buying a tokenized money market fund and buying a money market fund,” he added. “The tokenized fund can move faster and be used by investors.”

BlackRock issued its first tokenized fund, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), on the Ethereum blockchain in May this year. The fund is available to investors by subscribing to the fund with Securitize, the platform for tokenizing real-world assets, and reached $500m in a record time of less than four months.

Another traditional asset manager, Franklin Templeton, also launched a tokenized money market fund back in 2021, represented by a BENJI token. Franklin Templeton said the tokenized fund is the only US-registered mutual fund to use a public blockchain to process transactions and record share ownership.

On 13 September Janus Henderson Group said in a statement that it will be entering into a partnership with Anemoy Limited and Centrifuge to manage Anemoy’s Liquid Treasury Fund, a fully on-chain, tokenized fund issued on Centrifuge’s public blockchain that provides investors with direct access to short-term US Treasury bills

In addition to tokenized money market funds, Novogratz expects more private funds to go on-chain, because the process for investors to sell their holdings is very inefficient. He noted that a number of private funds have been tokenized, but liquidity requires scale.

For example, ParaFi Capital, an alternative asset management and technology firm with over $1bn in assets under management, said in a statement this month that it has tapped Securitize to tokenize an interest in one of its venture funds on the Avalanche blockchain.

ETFs

Galaxy Asset Management partnered with fund manager Invesco in July this year to launch the Invesco Galaxy Ethereum ETF, after spot ethereum exchange-traded funds were authorised by the US Securities and Exchange Commission.

“We see our role as partnering with legacy firms who have huge distribution, as crypto becomes a mainstream asset,” Novogratz added. “Crypto went from being a fringe asset class to being credentialized this year.”

On 10 September 2024 State Street Global Advisors said in a statement that it was introducing three actively managed digital asset and disruptive technology focused exchange-traded funds, sub-advised by Galaxy Asset Management, an affiliate of Galaxy Digital Holdings.

Anna Paglia, chief business officer of State Street Global Advisors, said in a statement that digital assets and blockchain technology have the power to transform financial markets as well as the economy over the next decade, but some investors are not comfortable with the short-term, volatile price swings of single-currency crypto.

Paglia said: “We believe the next evolution of this market is the introduction of actively managed digital asset portfolios that help investors tap into the benefits of diversification, which is appealing to a wider range of investors, and why we are excited to bring these three products to market.”

Novogratz continued that the SEC’s approval of the  bitcoin and ether ETFs show that crypto is here to stay, and he expects rapid change in the legislative process after the US election in November. He explained that banking regulators have kept many legacy players away from crypto.

“I think that will flip in the next 12 months, no matter who wins the US election, and will unleash a quantum amount of capital into our space,” he added.

Watch this space !! A big deal!! https://t.co/l0sqyWVLSM

— Mike Novogratz (@novogratz) September 13, 2024

Other businesses

Novogratz said asset management is one of four of Galaxy Digital’s businesses alongside trading, advisory and merchant banking.

After crypto exchange FTX filed for bankruptcy, the estate chose Galaxy to help with the process of compensating investors.

“We took FTX’s assets and gave back $8bn in cash nine months later,” he said. “We did a spectacular job that allowed us to accelerate the growth of some other businesses.”

He described infrastructure as the most exciting part of Galaxy’s businesses. Galaxy owns a bitcoin mine in Texas which is running infrastructure for crypto blockchains, which Novogratz said is perfectly suited to being a data center for AI.

“We are in discussions to figure out a plan to become a data center business, which is a diversified income stream that is not correlated  to crypto,” added Novogratz.