Legal & General Investment Management (LGIM), a prominent London-based investment firm managing approximately $1.5 trillion in assets, is venturing into the blockchain tokenization space, following the footsteps of industry leaders like BlackRock and Franklin Templeton.

Ed Wicks, LGIM's global head of trading, highlighted the potential of digitizing the funds industry to enhance efficiency, reduce costs, and broaden investment access.

The trend towards tokenization is gaining momentum, with other major financial institutions such as Franklin Templeton, State Street, and Abrdn also exploring tokenized fund options.

The market for tokenized securities has expanded significantly, now valued at $2.3 billion, with BlackRock's BUIDL product commanding a notable market share of $551 million.

In November 2023, UK investment funds received approval for tokenization from a government working group, enabling FCA-authorized funds to adopt this innovative model under specific conditions.

Tokenization involves converting traditional assets, such as U.S. Treasuries-backed money-market funds, into blockchain tokens, a practice that is increasingly being adopted by financial firms.

Michelle Scrimgeour, LGIM's outgoing CEO, expressed that fund tokenization could significantly improve efficiency, liquidity, and risk management within the industry.

Wicks confirmed that LGIM is actively assessing methods to offer its liquidity funds in tokenized formats, aligning with the broader industry shift.

Franklin Templeton has been a pioneer in this space, launching the OnChain U.S. Government Money Fund in 2021 as the first U.S.-registered fund to utilize a public blockchain for transactions.

The push towards tokenization was notably accelerated by BlackRock's introduction of its BUIDL fund on the Ethereum blockchain, setting a precedent in the market.

LGIM's interest in blockchain technology is not new; it dates back to 2019 when the firm announced plans to utilize Amazon Web Services' managed blockchain for managing bulk annuities.

This current initiative reflects LGIM's ongoing commitment to integrating crypto technology, as evidenced by their previous partnership with Amazon Web Services for blockchain applications in annuity transactions.