BNY Mellon has taken another decisive step into blockchain-based finance with the launch of a tokenised collateralised loan obligation (CLO) fund. The move, announced on Wednesday, highlights the bank’s methodical expansion into digital asset tokenisation following earlier ventures into tokenised money market funds.
The new Securitize Tokenised AAA CLO Fund offers institutional investors blockchain-based access to AAA-rated floating-rate CLOs on the Ethereum network. BNY Mellon will act as custodian, while portfolio management will be overseen by its subsidiary, Insight Investment.
According to Securitize, the initiative represents the first tokenised fund focused on AAA-rated CLOs, bringing institutional-grade structured credit onto the blockchain. The fund builds on the momentum from BNY’s collaboration with Goldman Sachs earlier this year, which saw the launch of tokenised money market funds via Goldman’s Digital Asset Platform.
From Money Markets to Structured Credit
BNY Mellon’s latest initiative demonstrates a deliberate, phased approach to tokenisation. The bank’s journey began with money market funds, a relatively simple asset class due to its liquidity, transparency, and established regulatory framework. Tokenising such instruments allowed institutions to familiarise themselves with blockchain settlement and custody models under low-risk conditions.
CLOs, on the other hand, represent a more complex and nuanced financial product. These instruments bundle corporate loans into tranches with different risk profiles, requiring constant monitoring of loan performance, cash flow, and credit quality. The global CLO market, valued at around $1.3 trillion, involves a network of originators, trustees, rating agencies, and servicers, all of whom must coordinate effectively.
By moving from money markets to CLOs, BNY Mellon signals growing confidence in managing more intricate tokenised structures while maintaining the regulatory discipline and operational oversight expected by institutional investors.
Institutional-Grade Tokenisation and Risk Controls
Unlike crypto-native firms, traditional banks face distinct hurdles when adopting blockchain technology. They must integrate legacy infrastructure, adapt to existing regulatory frameworks, and ensure institutional-grade security for clients.
BNY Mellon’s structured credit tokenisation framework addresses these concerns through a controlled, hybrid model. It retains conventional recordkeeping systems alongside blockchain-based ledgers, ensuring continuity in the event of technical disruptions. Custody remains under established legal protections, while settlement occurs on permissioned networks rather than fully decentralised blockchains, allowing oversight and compliance enforcement.
This model captures the benefits of blockchain, faster settlement times, lower reconciliation costs, and smart contract automation, while preserving regulatory safeguards. Smart contracts handle tasks such as cash flow distributions and corporate actions, but final authority rests with regulated custodians.
This cautious but strategic approach stands in contrast to decentralised finance (DeFi), where innovation often prioritises speed over security. By prioritising risk management and regulatory compatibility, BNY Mellon aims to deliver real-world blockchain adoption suited to institutional expectations.
Competitive Landscape and Market Outlook
BNY Mellon’s entry into tokenised structured credit positions it within an increasingly competitive field. Goldman Sachs, Citigroup, and BlackRock are all pursuing similar tokenisation strategies, targeting institutional-grade instruments.
Goldman Sachs has hinted at spinning off its Digital Asset Platform into an industry-wide utility, while Citigroup serves as a tokenisation agent and custodian for digital assets on Switzerland’s SDX exchange. Meanwhile, BlackRock’s tokenised Treasury fund has seen rapid adoption, serving as a proof of concept for on-chain liquidity in traditional markets.
Carlos Domingo, CEO of Securitize, which has already issued $4.5 billion in tokenised assets, called the new CLO fund a key step toward democratising access to high-quality credit. His firm recently announced a merger with Cantor Equity Partners II at a $1.25 billion valuation, further strengthening its presence in the institutional tokenisation market.
According to Boston Consulting Group and Ripple, the global tokenised real-world asset (RWA) market could expand from roughly $35 billion today to $18.9 trillion by 2033, reflecting massive potential across fixed income, real estate, and private credit sectors.
However, obstacles remain. Cross-border regulation, legal harmonisation, and operational risks, including smart contract vulnerabilities and key management, continue to slow mass adoption. Yet, the measured pace of banks like BNY Mellon underscores a pragmatic belief: tokenisation’s future lies in combining blockchain’s efficiency with the trust and structure of traditional finance.
A Blueprint for Institutional Tokenisation
BNY Mellon’s foray into tokenised CLOs underscores how traditional financial institutions are gradually transforming complex products into digital, programmable assets. By maintaining regulatory compliance and institutional-grade controls, the bank demonstrates a blueprint for responsible tokenisation, one that bridges legacy finance with blockchain innovation.
As the industry moves from pilot projects to scalable deployment, BNY Mellon’s careful evolution, from money markets to structured credit, positions it at the forefront of institutional blockchain adoption, setting the tone for the next chapter in the tokenised finance revolution.
