BNY launches digital transfer agency for tokenised funds

BNY has launched digital transfer agency services for tokenised funds, starting with selected clients in the US and UK.

The offering extends the bank's transfer agency work into digitally native fund structures, including funds issued directly on blockchain networks. It supports both digital and traditional asset funds across multiple jurisdictions and blockchains through a single servicing model.

Transfer agency functions typically include maintaining investor records, processing subscriptions and redemptions, and keeping fund books and records. Here, BNY is applying those functions to tokenised funds whose legal title and economic value exist on-chain, rather than through so-called digital twin structures that mirror conventional fund records.

That means a fund's books and records can be represented on a public blockchain. Subscriptions and redemptions can be handled in both fiat currency and stablecoins, with mint and burn functions used to create and retire digital fund tokens.

First users

Among the first issuers using the service are BNY Investments Dreyfus, Baillie Gifford and BlackRock. Their involvement shows how large asset managers and fund providers are testing tokenised fund structures in areas such as money market products and cash management.

BNY Investments Dreyfus is launching a digitally native money market fund under the new framework, with BLIQUID tokens representing shares in the fund.

Baillie Gifford has already brought its product to market through the arrangement with BNY. The bank described the Baillie Gifford Enhanced Yield Fund, or BAGEY, as the first publicly available, fully native UK-regulated tokenised fund.

BlackRock is also expected to use the service for BSTBL, a tokenised share class of one of its money market funds. The product is designed to meet stablecoin reserve requirements.

The focus on money market funds reflects a broader push by financial groups to link tokenised assets with cash-like instruments used for settlement, reserves and treasury management. Stablecoin issuers and institutional investors are among the target buyers for the new Dreyfus fund.

Broader push

The launch is part of BNY's wider digital assets strategy. Its digital transfer agency work sits alongside custody, stablecoin enablement, tokenised deposits and other services aimed at institutional use of digital assets.

The digital service is also linked to BNY's underlying transfer agency recordkeeping systems. That is intended to provide a single ownership and transaction record across both traditional and digital environments, a key issue for asset managers seeking to avoid fragmented reporting and reconciliation.

For established fund servicing providers, tokenised funds present both a practical challenge and a commercial opportunity. Managers want new distribution channels and on-chain transferability, but they also need the investor accounting, regulatory controls and operational processes that support conventional fund ranges.

Emily Portney, Global Head of Asset Servicing at BNY, set out the group's view of the market direction.

"With this new capability, BNY is helping power the future of financial markets through digital market infrastructure with a global, scalable platform that integrates tokenization, distribution, and custody," she said.

"We are excited to support clients as they expand into new asset classes, enabling true on-chain mobility of real-world assets, with legal representation of the fund's books and records on a public blockchain," Portney added.

Carolyn Weinberg, Chief Product and Innovation Officer at BNY, said the new service is designed to bring familiar fund servicing processes into digital markets.

"Digital Transfer Agency capabilities represent the next evolution of fund servicing, combining the same operational rigor, transparency and trust of traditional services paired with the future of innovation in digital markets," she said.

"As fund managers increasingly bring digital investment products to market, we're excited to bring together the resilient framework they rely on with digital markets interoperability that makes asset servicing and mobility easier," she added.

Stephanie Pierce, Deputy Head of BNY Investments, linked the launch to the investment arm's product plans.

"We are pleased to advance BNY's ongoing efforts to bring together distinct capabilities into integrated, innovative solutions that address evolving client needs," she said.

"Digital TA will further strengthen our ability to combine investment and servicing expertise to deliver digital asset solutions that simplify cash and liquidity management," Pierce added.

BNY services about $8.6 trillion in assets and more than 7.6 million investor accounts, giving it a large base from which to offer both conventional and tokenised fund administration. The scale of that transfer agency business is likely to matter as digital fund structures move from pilot projects towards wider institutional use.