TBW - Emma Pecenicic (Fidelity International): “Tokenized funds could be to ETFs what ETFs were to previous structures”

You launched FILQ on May 6th with a Moody's AAA-mf assessment from day one. Was that assessment a precondition for the launch?

At the genesis of this product, we identified what was missing in the market: institutional-grade credit assessment to establish high-quality collateral on-chain. That is why we approached Moody's. To be clear, it is not a simple AAA assessment — it is an AAA-mf assessment, which means it is specifically designed for money funds. Moody's looked at credit quality, liquidity, and the overall tokenization structure through their digital asset economy team. We had a business case beyond that assessment, but we believed it would be a strong added value. Nothing was guaranteed when we started the process. It was a lengthy evaluation — FILQ was the first 24/7 token they assessed, so there were extensive discussions around how to apply their framework to a product that never stops trading.

Your ecosystem stack includes Sygnum Bank, JPMorgan and Chainlink. What drove these choices?

Sygnum Bank was a natural fit. We structured what we call a digital twin with them. About two years ago, we had already brought our Institutional Liquidity Fund's NAV data on-chain using Sygnum's infrastructure, so we learned a great deal from that collaboration and became comfortable with their tokenization and distribution capabilities. JPMorgan is a longstanding partner of Fidelity International. We use their Kinexys platform, which is one of the reasons we were able to build the 24/7 settlement framework — fiat and stablecoin access to the product runs through Kinexys. As for Chainlink, we developed the same on-chain NAV data feature almost two years ago, at Point Zero Forum in 2024. For FILQ, we essentially rebuilt those capabilities but digital native from day one. The intention from the start was clear: a digital native solution, a 24/7 token, and if possible the AAA-mf assessment, all targeting the on-chain ecosystem — collateral management, stablecoin treasuries, large blockchain institutions.

FILQ is currently live on Ethereum. Do you plan to go multi-chain?

We have a multi-chain approach in our development roadmap, but the priority is to scale on Ethereum first. Most of the volume in tokenized assets is happening there today. It makes sense to leverage the existing infrastructure before expanding.

"Traditional money market funds cannot trade at night or during the weekend. FILQ can"

Concretely, what problem does FILQ solve that traditional money market funds don't?

Traditional money market funds, at best, offer T+0 end-of-day settlement. You can have multiple settlement windows during the day — that is what our Institutional Liquidity Fund does, for example. But you cannot trade at night or during the weekend. FILQ offers a 24/7 framework. We have specific provisions for what we define as outside-of-market hours, which is between 9 p.m. UK time and 1 a.m. UK time — essentially early Asian hours — plus the weekend. During those windows, liquidity provisions are made available to token holders. We believe that having a product capable of 24/7 primary market activity is more digital native in nature and should build confidence for secondary market activity at a later stage. That is the roadmap we are following.

What are early clients actually doing with FILQ in practice?

At the moment, the primary use cases are treasury management and collateral. We are not DeFi-enabled. All clients need to be whitelisted to access the product, and the minimum investment is 100,000 US dollars. We target professional and institutional investors in the UK, Switzerland, Hong Kong, Singapore and Luxembourg. The product is really aimed at the offshore crypto market.

Tokenization is often compared to ETFs — a revolution in access and distribution that took twenty years to mature. Do you share that analogy?

There are more nuances to it. We do believe tokenized funds are the next iteration for the fund management industry — from retail funds to ETFs to tokenized funds. However, there are significant prerequisites that need to happen for tokenized funds to succeed that were not necessary for ETFs. ETFs were built on top of existing traditional finance infrastructure. For tokenized funds, you need integrated 24/7 payment systems. Ideally, you need tokenized assets on both sides, so you can manage assets and liabilities on-chain. That is what we are trying to do with FILQ: bridge that gap. But the full efficiency gain for investors will come when the entire financial asset stack is on-chain.

"The appetite for the collateral use case is slightly greater in Asia"

You are based in Hong Kong. Where is the demand stronger — Asia or Europe?

We are seeing demand from both sides, with different use cases. In Europe, it is mostly corporate treasuries and blockchain protocol treasuries. In Asia, the collateral use case is more prominent, alongside crypto trading activity. As a result, the appetite for collateral is slightly greater there. But the discrepancy is not massive — it is a matter of nuance.

The SFC has been relatively proactive on digital assets. Does the Asian regulatory framework give you a competitive edge?

The SFC's proactive stance on crypto regulation does not directly impact fund tokenization specifically, because the framework for that was already clarified at the end of 2023. However, it helps build the broader ecosystem that is necessary for our product to succeed. When you clarify roles and responsibilities for local actors, they can grow, and in return our product grows. There are already a few tokenized products on the market in Hong Kong, so we are ready to address that market. That said, our product is domiciled in the Cayman Islands under the Cayman Mutual Funds Act. Tokenization regulation applies from a distribution perspective — you always need to look at where the product is domiciled and then where you distribute it. The jurisdictions we have selected reflect where we see the greatest regulatory clarity and the greatest appetite for digital native products.

Now let's address the elephant in the room. BlackRock's BUIDL controls roughly 15% of the tokenized money market fund market. You are entering a space where they set the standard. What is your differentiation thesis?

First, you need to look at the growth potential. We are at about 15 billion dollars in total market capitalisation for a market we expect to reach 600 billion by 2030. That is a 40x increase. We are at the very beginning of the exponential curve. Yes, BlackRock was an early entrant, but considering the potential of this market, I do not think it is overpenetrated. We are coming in strong, with a differentiated proposition. We are proud of the AAA-mf assessment — and the fact that the competition obtained it right after us validates that it was the right call. We are the first product in the offshore market with 24/7 primary trading, operating from jurisdictions that have clarified their stance on digital native assets. From an investor perspective, you get regulatory clarity around token ownership, a top-tier asset manager, a top-grade tokenization platform, and 24/7 operability. We designed this product from the core not to copy-paste what exists, but to differentiate with a value proposition that I believe is genuinely strong.

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"The border between on-chain and off-chain will blur"

Does the 40x growth projection reflect genuine institutional demand, or is it still largely driven by crypto-native players?

It will be a combination of both. When you look at large banks and corporate players that are beginning to adopt tokenized finance, we should see more demand from the traditional side moving on-chain. As a result, the border between on-chain and off-chain will blur, and there will be more ability to pass liquidity from one world to the other. That is exactly what FILQ intends to facilitate.

There is a lot of discussion about tokenized deposits and money market funds right now, but stablecoins seem largely absent from institutional conversations. Why?

I think that might be a European perspective, if I am honest. In Asia, the SFC's announcement on stablecoin regulation about two months ago really triggered the need to look at tokenized assets and tokenized funds more broadly. The discussion in the US is also advancing. Here in Asia, we are having more conversations about how the interplay between products like FILQ and stablecoins will eventually play out. It should come back in Europe at some point — I think it is just a matter of time.

What are the biggest remaining hurdles for broader adoption?

The first is regulatory. For this market to work at scale, you need cross-border distribution. Today that is simplified for professional tokens like ours, but it is not yet the case on the retail side. The second hurdle is connectivity. Even with our 24/7 capability, having a liquid and well-connected product requires a large number of integrations, and each one takes time. For every technology connection, there is a legal contract, an oversight framework, a governance layer. We are building this the institutional way, which means a high level of oversight on every connection and every partner we bring into the structure. There is a real gap between market expectations and the reality of building this type of product at scale.

In five years, will on-chain cash be standard infrastructure for institutions, or will we still be in a pilot regime?

I do not think we will still be in pilot mode. I deeply believe that when regulators become more comfortable with retail use cases, this could scale really fast. You can already see it from use cases emerging around crypto exchanges and payment platforms, whether in Europe or in Asia. The trajectory is clear.

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