Tokenization is rapidly emerging as the next big theme in asset management, with a growing number of firms exploring blockchain-based fund structures. But according to Gabor Gurbacs, CEO of capital markets infrastructure firm OpenAssets, the conversation may be missing the point: tokenization isn’t about replacing ETFs, it’s about upgrading the infrastructure that powers them.
According to data compiled by Asset Tokenization, the tokenization market could reach $2 trillion by 2035. Consulting firm McKinsey projected the same market to reach $1.9 trillion by 2030 and $4 trillion by 2035.
“ETFs solved a real structural problem, they made markets more accessible, more liquid and dramatically cheaper than what came before,” Gurbacs said. “Tokenization is solving the next evolution of the same problem… These aren’t competing ideas. One built the road; the other is repaving it.”
Fixing The Rails, Not The Wrapper
Gurbacs argues that while ETFs remain an “excellent” product wrapper, they still rely on legacy systems. “ETFs still settle T+1, still require a broker, still operate inside market hours and still can’t reach the 7 billion people globally who don’t have access to a brokerage account,” he noted. “Tokenization doesn’t fix what’s wrong with ETFs. It fixes what’s wrong with the market infrastructure ETFs are forced to run on.”
That distinction is key. Rather than competing with ETFs, tokenization operates at a deeper layer—impacting issuance, settlement, custody and distribution. In fact, Gurbacs suggests the industry may be framing the shift incorrectly. “ETFs are a product. Tokenization is infrastructure. A tokenized ETF is already a real thing.”
Coexistence Before Convergence
Despite growing hype, Gurbacs does not see tokenized funds displacing ETFs anytime soon. Instead, he expects a long period of overlap. “Coexistence for a long time and then gradual convergence,” he said. “At some point the distinction between a tokenized fund and an ETF becomes mostly semantic.”
Still, the underlying mechanics are evolving. In traditional ETFs, authorized participants help keep prices aligned with underlying assets. In tokenized markets, similar functions are still being developed. “Smart contracts and on-chain arbitrage mechanics can replicate a lot of what authorized participants do today, but the honest answer is that this is still being worked out,” Gurbacs said.
Opportunities—And Real Risks
The potential benefits are significant. Gurbacs points to materially lower costs, faster settlement and broader access as key advantages. “Settlement costs come down materially… we’re seeing 10 to 30 times cost reduction in live deployments,” he said.
But risks remain. “Infrastructure risk is underappreciated, smart contracts can have bugs and on-chain settlement is irreversible in ways that traditional finance is not,” he warned. Regulatory uncertainty also persists, even as frameworks begin to take shape.
Perhaps most importantly, Gurbacs cautioned against overestimating what tokenization can achieve. “Tokenization improves the plumbing. It doesn’t change the quality of what flows through it. Investors who forget that second point will get hurt.”
Where Tokenization Comes First
In terms of adoption, fixed income appears to be the most immediate opportunity. “Bonds are inefficient to issue, expensive to settle and largely inaccessible to retail investors globally,” Gurbacs said. Money market funds, private markets and commodities are also likely to see early traction, while equities may take longer due to already efficient infrastructure.
Looking ahead, Gurbacs envisions a more connected and efficient financial system, but not overnight. “The technology is ready before the ecosystem is, and the ecosystem is ready before the regulation is,” he said. “The direction is right. The pace projections are not.”
For ETFs, that means evolution—not extinction.
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