Ireland is committed to supporting the development of tokenisation. mtcurado/iStock
03 Nov 2026, 11:53 am
Ireland has an opportunity to translate its established leadership in money market funds and fund servicing into a leading position in the emerging market for tokenised funds.
As tokenisation moves from proof of concept to commercial reality, policymakers, regulators and industry participants are increasingly focused on how distributed ledger technology could transform the way fund ownership is recorded, transferred and serviced.
The European Central Bank estimated the global market for tokenised money market funds was approximately €7 billion at the end of 2025, having roughly doubled during that year. Its conclusion confirms that the market remains small relative to conventional funds, but it is expanding rapidly and demonstrates genuine demand, particularly for liquidity management and collateral use.
A tokenised money market fund is a regulated investment fund that invests in short-term, high-quality assets. The distinction is that its shares are recorded using distributed ledger technology (DLT). A token evidences an investor's shareholding in a fund, typically on a one-token-per-share basis. The token is neither a stablecoin nor a new economic asset; it is a digital representation of an existing fund share.
The fund itself remains subject to the existing regulatory framework, including Regulation (EU) 2017/1131 (the Money Market Funds Regulation). Importantly, the tokenisation of a fund share does not alter its regulatory status.
Shares in investment funds constitute financial instruments under MiFID, and ESMA's guidance on the qualification of cryptoassets as financial instruments confirms that a tokenised financial instrument remains a financial instrument for regulatory purposes. Consequently, tokenised fund shares do not fall within the scope of MiCA (Regulation (EU) 2023/1114).
To date, the representation of fund shares in Ireland as tokens has used the digital twin model. In this model a money market fund is constituted in the normal manner, and a register of shareholders is maintained by the administrator as the definitive record of ownership.
For each share a corresponding token is minted on a distributed ledger, and tokens can be transferred between investors that are approved by the fund. However, legal title to shares only changes in accordance with the fund’s constitutional documents as and when the share register is updated by the administrator.
Reconciliation of the DLT records and the share register is therefore essential. One share must always correspond to one token, and the share register would prevail if the records were to diverge.
The distributed ledger infrastructure can facilitate multiple functions such as immediate transfer, automated rule-based processing, the recognition of investors who are whitelisted, and collateral mobilisation.
A natively tokenised model goes further than the digital twin. In this scenario shares are issued ‘on-chain’ and the distributed ledger operates as the legally recognised share register and proof of ownership. This removes duplication, but only if the applicable law and regulations recognise the distributed ledger entry as the legal record of title.
The International Organization of Securities Commissions’ review confirms that current models range from an off-chain register remaining authoritative, through hybrid registers, to distributed ledgers operating as the primary legal record.
An objection to the hype about tokenisation is that the European money market fund industry is functioning efficiently and doesn’t need fixing. Subscriptions and redemptions are processed reliably, frequently on a same-day basis.
Proponents of change do not point to failures in the present infrastructure but question whether the present system constrains what funds can do. Tokenised shares permit arrangements that cannot be utilised by traditional shares such as instantaneous transfer/settlement, collateral substitution which may be triggered by exposure rather than by instruction, automated sweeping between accounts, and distribution mechanics conditioned on investor or portfolio state.
In May 1974 Fidelity Investments first launched a money market fund with cheque-writing functionality. This remarkable innovation allowed investors to write cheques for the payment of goods and services against their money market account and made shares more ‘money-like’. Tokenisation offers similar benefits. Representing fund shares on a distributed ledger, which is a programmable infrastructure, can reduce friction in recording ownership, transfers, settlement and distribution.
The normal cycle for the transfer of shares is constrained by dealing days, dealing cut-offs, processing cycles, valuation points and banking hours.
Tokenisation enables investors to transact instantaneously with each other – for example, fund shares that are tokenised can be transferred in seconds to other participants in the tokenised ecosystem which is sometimes described as enabling 24/7 trading.
To date, funds are not yet fully on-chain as underlying fund assets remain off-chain, and subscriptions and redemptions are settled through the traditional banking system and remain subject to usual settlement timeframes.
Tokenisation means it is operationally feasible to use Undertakings for Collective Investment in Transferable Securities (UCITS) shares for collateral management.
The margining of over-the-counter (OTC) derivatives can be achieved through the instantaneous transfer of tokenised shares to counterparties, avoiding the requirement to liquidate and post cash collateral. This process could significantly reduce operational and liquidity risk for parties involved in margin calls.
UCITS shares are already eligible collateral for uncleared OTC derivatives under Commission Delegated Regulation 2016/2251.
Tokenisation can also materially improve the efficiency of transaction processing. A tokenised share class can enable near real-time processing and settlement, significantly reducing the administrative workload associated with trade matching, cash reconciliation, transfer verification and post-trade processing.
Smart contract technology can automate eligibility checks, transfer restrictions, investor whitelisting, daily dividend payments, compliance controls and certain corporate actions, reducing the volume of manual oversight and exception management currently performed by administrators.
The result is a more automated operating model with lower transfer agency costs and enhanced investor experience.
Investors would like digital account opening, real-time information and greater portability of their holdings. Tokenisation allows investment funds to be distributed through digital channels. Furthermore, tokenisation has the potential to be integrated into digital platforms such as tokenised asset trading platforms.
For retail investors, the rise in ‘neo-brokers’ demonstrates that retail investors increasingly access financial products on a self-directed basis through smartphones and digital platforms.
Many of the regulatory challenges associated with tokenisation are not new. Traditional fund administration already has well-established processes for investor verification, correction of net asset value (NAV) errors, maintenance of the share registers and investor compensation. The question is whether equivalent standards of governance, control and investor protection can be achieved where ownership interests are recorded and transferred on a distributed ledger.
Anti-money laundering (AML) and investor verification is an important consideration as funds must continue to satisfy anti-money laundering requirements. For this reason, tokenised funds are expected to operate on a permissioned basis, with tokens capable of being held and transferred only by whitelisted investors through authorised wallets.
This allows transfer agents to maintain oversight of investor activity, preserve regulatory controls and meet compliance obligations while benefiting from a more automated operating model.
There is a need to ensure the proper treatment of NAV errors. The established principle remains unchanged: where a NAV error occurs, affected investors should be restored to the position they would have been had the error not arisen.
Tokenisation introduces an additional layer of remediation as the digital ownership record must also be corrected. In tokenised fund structures, the transfer agent retains controlled authority over the distributed ledger, enabling it to mint additional tokens, burn excess tokens and make corrective entries to investor wallets to ensure that the digital register accurately reflects investors' entitlements.
There are also broader questions relating to financial stability and market infrastructure. Tokenised fund interests may be more readily transferred, pledged as collateral or incorporated into financing and structured transaction arrangements. While this would improve market efficiency and collateral mobility, it could also increase the speed of collateral reuse and contribute to higher levels of leverage within the financial system.
Tokenisation has the potential to fundamentally reshape the transfer agency model. Many routine activities, including transaction capture, register maintenance, payment matching, investor eligibility verification, distribution reporting and certain corporate actions, could be transformed through greater automation.
That automation does not diminish the importance of regulatory oversight. Investor onboarding and identification, AML and countering the financing of terrorism and sanctions controls, exception management, register rectification, complaints handling, data governance and technology oversight will remain critical functions. The transfer agent of the future will be the governor of a digital ownership system, controlling permissions, resolving exceptions and providing the legally reliable bridge between investors, funds and distributed networks.
There is a broader strategic case for tokenisation. In financial markets, structures that adapt to changing investor expectations and market infrastructure tend to gain ground over those that do not.
Money market funds increasingly compete on distribution reach, collateral utility and servicing efficiency. As digital infrastructure, settlement networks and distribution channels continue to mature, these advantages are likely to become more pronounced. The risk for incumbent funds may be a gradual erosion of market share in segments where investors and counterparties favour more flexible and digitally enabled alternatives. The likely result is increasing product differentiation, with tokenised and non-tokenised structures serving distinct market needs as the industry evolves.
At the end of June, Irish domiciled money market funds had more than €986 billion of assets under management. The scale and concentration of this sector creates a genuine competitive advantage. Tokenised money market funds require precisely the disciplines Ireland already performs at scale: high-volume transaction processing, liquidity oversight, global investor onboarding, multicurrency servicing, register maintenance and regulatory reporting.
The commercial case is strongest where tokenisation improves existing processes. Potential gains include faster transfer and settlement; extended transaction availability; automated eligibility and transfer checks; reduced reconciliation across distributors; more transparent ownership records; programmable distributions; and the ability to mobilise fund interests as collateral without redeeming them for cash. Fractional holdings and lower operational minimums may also widen access, where product and distribution rules permit.
The Department of Finance in its Ireland for Finance Vision 2030 is committed to supporting the development of tokenisation of investment funds. As part of this initiative, consideration is being given to modernising key elements of the domestic legislative framework, including the Irish Collective Asset-management Vehicles Act and the Companies Act, to ensure that Irish fund structures can accommodate emerging digital and distributed ledger technologies.
Finally, tokenisation does not eliminate infrastructure risk. During the transition period, fund managers may need to operate traditional and distributed ledger-based systems in parallel, potentially increasing rather than reducing operational costs.
The success of tokenised fund models will also depend on the development of robust supporting infrastructure, including continuous access to the distributed ledger, secure wallet technology, resilient smart contracts, interoperability across all systems, effective data protection frameworks and strong cyber-security controls.
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