## [# F/m Investment's CEO: Tokenization, ETFs, & On-Chain Finance](/sections/conferences/fm-investments-ceo-tokenization-etfs-chain-finance)
# F/m Investment's CEO: Tokenization, ETFs, & On-Chain Finance
F/m Investments CEO Alexander Morris discussed the plumbing changes necessary to bring a 40 Act-regulated Treasury ETF on-chain at the ETF Beach House at Future Proof Citywide. From the mechanics of a 1:1 token conversion to the role of transfer agents and SEC regulatory considerations, this conversation covers the complexities of tokenization, and why it's also an eventual inevitability.
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[By ETF.com Staff](/contributors/etfcom-staff)
Apr 03, 2026
Edited by: ETF.com Staff
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Dave Nadig, President and Director of Research at ETF.com, sat down with Alexander Morris, CEO of F/m Investments, at the ETF Beach House at Future Proof Citywide to talk tokenization1 and ETFs. The conversation covers the work the firm is doing to potentially tokenize one of their funds and the complexities and considerations of that process. The following is a transcript of their conversation.
## The Decision to Tokenize
**Nadig:** We're going to go ahead and get started here. I'm very excited for this panel. Another one of these sessions where I just get to grill somebody smarter than me about something I'm actually interested in.
**Morris:** I'm in the wrong place then.
**Nadig:** This is Alex Morris, who I will admit is a friend who is from F/m Investments. Simultaneously, one of the most interesting and most boring ETF providers in the entire industry. And I love it. We're not going to actually talk much about your ETF business, although I should point out that you guys did do the first real share class conversion, which we're not going to talk about, but that's interesting in its own right.
What we're here to really talk about is tokenization1, because you also did something pretty new there. I'm going to go ahead and let you give the 90 second pitch on what you actually did with your bond product.
**Morris:** Sure. So, [**TBIL**](https://www.etf.com/TBIL) \[F/m US Treasury 3 Month Bill ETF\], which is one of the most boring bond products you're going to see on-the-run 90-day, has had a really attractive yield but really unavailable to digital investors. So we asked the SEC for a plumbing change essentially to allow us to tokenize1 that actual share class, not create an alternative version.
**Nadig:** Interrupting you already. Digital investors. Who do you mean? Who are these people?
**Morris:** So they are all of us to some extent, right? Like, there is an interesting argument that the dollar is pretty digital anyway. There’s about $38 trillion floating around. Only$ 2 trillion of it is actually in paper. But practically, anyone you hear who is in the digital economy. So whether you were a Bitcoin buyer ten years ago, or one of the 5 to $6 trillion that are of IG debt and high yield debt that are created on-chain. Something you buy not in a national marketplace. Not a broker dealer, probably a digital investor who's doing that.
And there's an awful lot of cash sitting around on this other side of the divide. So not an ETF, not a mutual fund, not a traditional investment. Something that you bought through securitized Coinbase or just directly with somebody else through an atomic settlement process2, which I know we'll get into.
But practically it's all of those other investors who don't do the things that we're generally talking about here.
**Nadig:** So what does it mean to take this existing ETF, which already had, I don't know, $1 billion under something like.
**Morris:** Six and a half.
**Nadig:** Yeah, just tons of money. Right. Everybody's using it as the default peg for high precision investing. What does it mean? Well, practically speaking, what did you actually do to take that on-chain?
**Morris:** So what we will do—we need the SEC to fully agree to make all this happen—is to actually let it be TBIL. Many of the products you see that try to make that conversion from traditional finance to digital finance have this problem. They're not the same thing. They're clones. They're replicas. They're kissing cousins.
We asked to actually say allow TBIL to be converted into a token, and then back again at a 1:1 and allow the market making community that we use today to create the ETF and to allow liquidity to actually trade the token as if it was an ETF.
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## Preserving the 40 Act Trust Structure
**Nadig:** Okay. So when we talk about the digital investor who's now going to get access to this 40 Act regulated fund on-chain, they're not like—I can't just do this with my MetaMask wallet with extra Ethereum I have lying around, right? There's some sort of gating process here. Talk to me about that. Like how much of a gate is that really?
**Morris:** Exactly. So, our hope is to make it a reasonably small gate, but a meaningful gate. Because today when you go, when you open your brokerage account, you fill out AML, KYC paperwork. There's a whole bunch of regulatory steps that we do, which are pretty good. And the gap we're trying to bridge here that trust is when you buy a 40 Act, most of us don't go and ask, “Well, who's the trustees? Do I like what they do?”
There's this in 85 years of accumulated trust that happens. So how do we allow that to come into the digital world? Well, you got to keep out some of the miscreants and bad actors, which means not allowing every single chain, every single other provider to participate. So we'll limit it to white labeled what we call ATS, the alternative trading systems, and make sure that there is some level of AML, some level of KYC.
We're not looking for this to be traded between North Korea and Iran, right? Which is sort of what a lot of folks, I think, were hoping tokenization1 would do to 40 Acts and...
**Nadig:** Yay, more crime.
**Morris:** Yeah. Like you got the wrong idea what the '40 Act does. We don't want to give the imprimatur of all of this accumulated trust and throw it away on allowing bad actors to come in, because ultimately the 40 Act does something really special. It gives you perfection of ownership to this asset. You know this is exactly what you own, your pro-rata percentage.
And if you're a market maker, you can pull that out from us today. If we all of a sudden allowed anyone who wasn't allowed to own those assets natively to have perfection of ownership to them, we'd be creating this really insane arbitrage. And we'd be breaking down some barriers that a lot of governments wouldn't like, and we asked to stay with within those boundaries. Totally.
**Nadig:** All right. So I still want to get down to some brass tacks stuff. And I know some of this is nascent. Like this isn't actually trading on a chain yet, right. So you're still waiting for some of this approval, but I'm going to have my own proprietary wallet that you will know the address of on a secure chain. A private chain like, not a permission to chain. That’s right so far?
**Morris:** Yep.
**Nadig:** And then I'll be able to move that around that ecosystem of that private set of wallets. Are we talking about sort of the same systems that people are doing things like bond issuance on, or they're doing some of the sort of other private equity stuff that people are moving around on-chain, but in these sort of secure private chains.
**Morris:** That's the goal and the intent. There'll be more than just our private chain. We may operate that one, but realistically we want to use the others that are out there. We want you to be able to transmit between one and the other, which is happening in some of those products. The goal is to give you freedom to move.
And by the way, to move back to the OG chain, the actual ETF, right. That's the end goal. Or if you have the ETF to choose which chain you want to go on to. And so this notion of “How do we do that?” has one really important player: the liquidity provider. Because what we don't want to do is create these pools of independent liquidity where Dave is on chain A I'm on chain B, you get worse pricing than I do.
**Nadig:** Oh, then it’s arbitrage.
**Morris:** There's arbitrage, and the market makers come around. Or worse—that's substantially different than what you would get in the ETF. We want this to be a really good experience. That gets us into the sort of the buzzword of 24x7 trading. Like, I know you and I agree, but for everyone else, I don't know that everyone getting up at 3 a.m. to trade more is what the industry needs, or what we need is investors.
So how do we actually help assure that there's reasonable liquidity everywhere? Understanding there are some foreign investors where that's the right time zone for them. Fair enough. And that's to make sure the market making community can support this and that we don't roll this out to so many places where we maroon investors, where now they have this ultra liquid asset, the 90-day TBIL, but no ability to transmute it.
That would be a failed mission.
**Nadig:** So part of the approach here has to be that you've got, you know, you're six, $24 billion, however many billions you've got sitting in the product right now, some of that's going to want to come on-chain. How do you envision that process working? Like me individually, I have a Schwab account. I might have some of your fund in it. How do I take that and then get it on securitize this chain or whoever's chain that you end up doing this with?
**Morris:** Sure. So two routes that we could see. One, if you own the mutual fund version of it today where you're at a TA, you probably could just skip right to the chain and we could take care of that for you. If you have the ETF and you want to come on-chain, you're going to need to use your broker dealers process to make that happen.
The way that we'll work with that is the TAs. This is the part of the business we never think about. I mean, if you're an issuer you think about it all the time, but as an owner of an asset, you don't really worry about who the transfer agent was. But they're going to play a really critical role in doing that conversion and keeping that ultimate ledger correct and making sure that everyone has what they say they own.
Because at the end of the day, we do need to check what all of those chains are doing and make sure that the numbers add up. They can never add up to more than they're supposed to, nor less, and that TA will have to work with each of the broker dealers to build a process. Good news that's coming whether we do this or not, and we think you'll see a pretty standard process coming out, led by some of the industry groups in the next few years to allow that to happen.
## Building the Bridge to On-Chain Finance
**Nadig:** And if it's just traditional TAs, or transfer agents, we're talking about, they all already have a relationship with Schwab because of mutual funds. Exactly. So like, that sort of makes that step go away.
**Morris:** It's kind of strange. Like, we woke up a few weeks ago and decided to get in our Delorean and start a mutual fund. You know, which is not something anyone was excited about for a very, very long time. But that mutual fund architecture isn't wrong or bad. It just wasn't perfect. And these are incremental improvements on that that we want to build on.
What you're seeing a lot of digital asset providers try to do is rewrite the rules, rewrite all the architecture. And that's a great idea until you look at the actual scale of trying to solve that problem. There are trillions of dollars spread over hundreds of millions of accounts. Putting that in a completely new architecture, hitting the button and hoping it works is a really dangerous and scary thing. And the broker dealers, frankly, won't do it. They shouldn't do it.
So how can we give that bridge to allow this to happen, both within the right regulatory framework, which, you know, some regulation is necessary, some of it's really good without doing a complete reset. That reset seems really scary.
**Nadig:** Well, let's talk about the reset. Let's dig into the scary part. Right? I've been saying for years that I will die and we will be doing atomic tokenized settlement1,2. And I'm hoping that's like 20 years away at least. But between here and there, a whole lot of stuff has to happen. And clearly this is a part of it is getting the first things on-chain in this constrained environment.
But meanwhile, we've got the DTCC over here talking about like doing creation, redemption on-chain for ETFs and eventually moving towards things like actually doing original listings of corporates on-chain. Help me understand how far away that bridge is and how you see things moving. Because you've taken the first step, you must have a vision on the next end.
**Morris:** Absolutely. So I get to play you for a second and say, well, what is atomic settlement2? Right? Which I think we hear a lot of when you hear that, just think cash and carry. Two of us make a transaction today, it's an as-is transaction, it's final. Sort of like selling a used car. That's it. You got what I got. I got the cash, we're done.
That there's a certain desire to do that, which we kind of do today through your Schwab account. Like when you make that trade, it's guaranteed by a clearinghouse. And, you know, it's a good trade. You can trade on those assets. Institutions still don't yet have that. Trades can be failed and decayed later on. There's a resolution process to make that happen.
This is a very final act, which I think is why we should be very cautious in what we do. There's no good way to reverse those transactions. Now, some of the smart contracts, which are the sort of stand-in for investment management contracts, the standard transactions we do are governed by a set of code that we all agree to. They do have some mechanism to do that. But if we're going to make this final transaction between you and me without anyone in the middle adjudicating it, looking at and interrogating execution quality, we've got to make sure it's good.
So I think what to us, this is 12 to 36 months away from meaningful steps. You're seeing lots of it happen today. The SEC has been very vocal about how they're participating and supporting elements of this ecosystem, and every week we get another little tidbit of where their head’s at. It's clear, though, that they want to try a lot of things, and they want this to work, and they want a digital economy that's safe and well regulated.
How we get there will be the interesting part. Our argument is let's start—the call should come from within the house, as it were, as opposed to outside trying to break in, which is what we see a lot of folks doing. And we think this is a good first step. Most of what you've seen in the last few weeks happened after our application, and it very nicely matches and is a companion to what our application was already so happy accident there. But we think you'll see something start to happen end of this year, beginning of next year.
Right now the SEC has to take oodles of different ways to achieve this and try to figure out which are compliant, which are not, which is the prioritization of trying to achieve this. They just they can't say yes to everything. They don't have the staff to review every single idea. And then there is a whole community of broker dealers, transfer agents, other participants who they also regulate separately, who they need to get ready as well. And that process takes some time.
## The Role of Regulators and Navigating Legal Frameworks
**Nadig:** Do you think it's going to happen from the SEC, or do you think the DTCC is going to kind of run its own program and get ahead of the game?
**Morris:** I think we could all try to do that, but they reserve the ultimate veto, right? They could just stop us out tomorrow, whether it's direct action or just ministerial delay. The DTCC did a smart thing in getting the no action letter from the SEC saying, “This is where we're headed”, but you'll see more of that. NYSE came up with its own opportunities set and we'll continue to do more of that.
You're going to see other exchanges. Cboe hasn't done anything yet, but I think you'll see them enter the game. You'll see the ATS’s more directly, because the crypto lobby in D.C., where I live, is very strong. They've been looking for other things to-date, but when they turn their sights towards this, there's going to be an entire firehose of assets coming at trying to solve this problem.
And I don't think it makes sense to get ahead of the SEC, because ultimately we don't want to provide a product that's worse for investors. And if you think about TBIL, we have a lot of investors in it. The cardinal rule for us is nothing we can do can ever injure their experience. So even if we get the yes today, there's a chance that we say, “Okay, well, as yes was said to us, we don't think we can provide a safe experience, so we're going to take a pause and do something else.”
**Nadig:** Let's talk about some of the areas where I know there's some pause here. And I'm just curious how you're going to solve these. The two that came up over and over again and my thinking on this, were voting and distributions. So how I know those aren't solved problems.
**Morris:** Not yet.
**Nadig:** But what do you think the answers are?
**Morris:** So let's talk about proxies. Because if you own QQQ you hate proxies.
**Nadig:** Did everybody get a QQQ proxy statement? I know I got a hundred.
**Morris:** I got about five phone calls, my wife is like, “What's going on here?” And if you've ever done a proxy calling people at at dinnertime, begging them to just breathe into the phone to vote, you know, this is a problem that needs to be solved. It needs to be solved for 40 Acts. It needs to be solved for 40 Acts on-chain, it needs to be solved for a lot of people. We think that will work.
There are some pretty good voting mechanisms on-chain that exist today. Many of them are in the Dow world, which is where you've got a group of people who are going to manage this by majority vote. So we've already got those mechanisms. That's how do we insert new players to it, a solicitor who can actually help get those votes. How do we get an accountant to come in and actually count them and check there wasn't fraud?
**Nadig:** Is there a legal framework for this like that? Like if you solve those problems now and you had those players ready, could you legally do a proxy vote on chain, or is there still sort of cruft in the way?
**Morris:** There's still some unknown in the way? The question is, could you do it? Maybe. Is it clear enough that we would want to? Not yet. And that's part of the problem set we need to do. Same with distributions. We could give you cash into your wallet. We could give you a stablecoin that we chose, a stablecoin that you chose. We could give you more new tokens and just allow you to reinvest on your own.
There's a handful of ways to solve that, none of which are fully known yet. And we think there's going to need to be optionality, just as today you can reinvest. Well, if we could take the drip program and do it automatically for you and take out all the friction, why wouldn't we do that?
So there's some known knowns of what we could do, and some unknown unknowns of what will be allowed to do. But we know there's a lot of improvement that can happen, and how much of that will be allowed to do is what the SEC will tell us in the coming months and years.
## What Tokenization Means for the Average Investor
**Nadig:** So one of the one of the noise issues, pardon the noise, that I keep facing here is like if if I'm a normal person, which I'm not, but or an advisor who services normal people, should I—is the end game here that like Schwab and Vanguard and my custodial platforms are also all going to end up being my digital platform? Because I'm trying to imagine a world like, as an advisor where I would have, you know, the bulk of my assets, say, Schwab, or Pershing, or Fidelity or someplace.
But then I also have this digital component too. Do you do you see that world or do you see more of an everybody's got a wallet and it's tied to your bank kind of thing?
**Morris:** I think we're going to see everyone has some digital presence. We have it today, whether you like it or not, right? And now you'll have a much more unified digital financial presence. The broker dealer world, the advisory world will now help advise you on it. I don't think digital advice did much to injure actual advice.
I don't think digital finance is going to do much to injure actual advice. It's a very human need we have to be given some advice on what to do, particularly with your retirement and all of your other hopes and dreams in financial form. But I think you'll see broker dealers start to offer integrations to these.
They'll also bring in their own chains. They want to help manage those assets. Today we see lots of folks going after on-chain collateral, just desperate to manage every dollar at rest and every dollar in motion. That sort of technology will make its way down to retail investors sooner than later.
**Nadig:** So one last question I had which and I apologize, this is like super nerdy in the weeds. So if I’m sitting in this fund, I guess the bridge I'm trying to make is how is this going to affect how the authorized participants think about creation and redemption. Like right now, if I want to make more shares of your fund and I'm an AP, I go buy a whole pile of T-bills and I show up.
**Morris:** Exactly.
**Nadig:** And you hand me a bunch of shares that goes through the NSCC overnight and now I have beneficial ownership. In this world before the DTCC gets us actually doing creation on-chain, are they arbitraging out a difference momentarily between on-chain price and their ability to create off-chain. And that sort of becomes the arb gap to close there?
**Morris:** That's where we would be today, because nothing is stopping any of us here from going and creating a token, saying it's buying TBIL, right? We could just, we could present that. It wouldn't be true, but you could do that. Since we're tokenizing1 the ETF itself, not creating a net new share class, we'll create the ETF the same way.
And we're asking for the right to allow the market makers to have that same right where they could say, “We're going to go and create the ETF at the end of day, same rules, and then immediately convert it to the token and provide delivery of that token to everyone.”
**Nadig:** It is like one seamless transaction. Is that how you see that working?
**Morris:** Exactly. Yeah. We want the liquidity providers to be there. Otherwise, the token will only be as liquid by as much token as exists. So now you have to pre-fund the market which has some natural limitations to it and is silly.
**Nadig:** That requires capital and…
**Morris:** You don't want an issuer trading their own stuff to try to make more net liquidity. Like there's just too much risk in there. We want this to be a natural process where the big folks who are providing liquidity today for all ETFs are doing the same on both sides. They have no incentive to charge more on the token side than the ETF side. So therefore the arb gap should naturally close.
## What Tokenization Shouldn't Be
**Nadig:** Okay, I lied I have one more one more question. I'll let this go by. So that solves some of the AP problem. You mentioned over and over again, the sort of you want to make sure there's liquidity in the market. You want to make sure you've solved the customer problems. One of the reasons we're friends is because you're one of the most trust-oriented people I know.
What are you worried about? Like what's the edge where you're like, I don't think we would do that because I don't see how we can trust it yet.
**Morris:** Well, so the first is we can't do anything where we're going to create a pool of liquidity that has different rights. So there could be an overt role.
**Nadig:** Like voting or something like that.
**Morris:** Voting, distribution, trading ability where you had to trade in a certain size.
**Nadig:** Something else. Verisimilitude. Key, key issue.
**Morris:** It's got to be the same. Like, we understand there'll be some natural differences that you just have to allow for, but we can't allow different rights. That seems unfair, and we wouldn't stand for it. We wouldn't stand for a system where there was different liquidity pools. Understandably different providers can show up because one's in AP and one is more on the digital side, but we don't want to give anyone an unfair advantage that will create arbitrage, that will also, you know, maybe maroon, an investor in one version or the other where they shouldn't be.
We don't know what other rules might come down, but we also wouldn't do it if it turned out we couldn't make the conversion or we felt there was risk that what we just did might be undone in some number of months. We want very definitive guidance, and frankly, we want others to come with us on the ride. Like we're not looking to do this alone.
We want someone to come in and build a standard that every broker dealer can work with. Because it being an interesting idea for TBIL is not interesting to us. We want this to be an industry motion where you forget that we're we all did this. We're all just playing along by the same rules, because ultimately there is a day when you may need to make a different investment.
And we want you to not have to sit down and think about strapping in for the morning and looking at 15 different regulations to decide, “Can I do this?” Or I have to start a Rube Goldberg machine of logins to make all of this work. This has got to be as simple as trading the ETF.
**Nadig:** Got it. Well thanks so much for your time Alex.
**Morris:** Thank you.
**Nadig:** I look forward to watching this evolve. It's going to be amazing.
---
**DISCLOSURES**
1\. Tokenization: The process of converting ownership of a real-world or financial asset into a digital token that exists on a blockchain.
2\. Atomic Settlement process: A transaction process where the exchange of assets and payment happens simultaneously and completely – or not at all.
3\. Stablecoin: A digital asset that keeps a steady price by being backed or linked to something stable.
**Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 1-800-617-0004. Read the prospectus or summary prospectus carefully before investing.**
Investments involve risk. Principal loss is possible. As with all ETFs, Shares may be bought and sold in the secondary market at market prices. Interest rate risk is the risk of losses attributable to changes in interest rates.
In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
TBIL Fund Risks: The UST 3 Month Bill Fund may be susceptible to an increased risk of loss, including losses due to adverse events that affect the UST 3 Month Bill Fund’s investments more than the market as a whole, to the extent that the UST 3 Month Bill Fund’s investments are concentrated in a particular issue, issuer or issuers, country, market segment, or asset class. While U.S. Treasury obligations are backed by the “full faith and credit” of the U.S. Government, such securities are nonetheless subject to credit risk (i.e., the risk that the U.S. Government may be, or be perceived to be, unable or unwilling to honor its financial obligations, such as making payments).
RBIL Fund Risks: The Bloomberg US Ultrashort TIPS 1-13 Months Index is composed of equally weighted sub-components that have a remaining maturity from one (1) month up to (but not including) thirteen (13) months (e.g., 1-2 month maturities, 2-3 maturities, etc.). Federal Reserve holdings of TIPS are excluded from the face amount outstanding of each bond in the Underlying Index.
The F/m Funds are distributed by Quasar Distributors, LLC, which is not related to the issuer or financial advisor.
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