Bank of New York Mellon to launch tokenized funds by the end of the year, Luxembourg leads the way, with a unified framework for traditional and digital assets coming into effect

One of the world’s largest institutional custody giants, managing $54.5 trillion in assets, State Street announced that by the end of 2026, it will launch tokenized fund services through its Luxembourg subsidiary, utilizing its digital asset platform to cover the entire lifecycle of issuance, management, and custody, enabling digital-native funds and traditional funds to operate in parallel within the same institutional framework.
(Background: BlackRock CEO calls for RWA tokenization: it is an inevitable trend! The future will move toward “a common blockchain” era)
(Additional context: HSBC tokenized deposits debut on the public chain Canton Network, with financial giants JPMorgan, DTCC, and Franklin following suit)

Table of Contents

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• DAP Platform: A Framework Covering the Entire Lifecycle
• Why Luxembourg? Legal Framework Supports First-Mover Advantage
• State Street Is Not Alone: The Institutional Tokenization Wave Has Grown in Scale
• Significance for the RWA Track: The Starting Point of Infrastructure Transformation

$54.5 trillion—that is the total assets under custody and management by State Street (NYSE: STT) as of now—more than half of the world’s GDP. This institutional giant, with over 51,000 employees serving more than 100 markets, officially announced on April 28 its entry into the tokenization wave: through its subsidiary, State Street Investment Services, it will launch tokenized fund services from Luxembourg by the end of 2026.

Once this news broke, the message was crystal clear: RWA (Real-World Asset) tokenization has moved from a self-congratulatory narrative among on-chain native communities to a formal proposition for traditional institutional infrastructure.

DAP Platform: A Framework Covering the Entire Lifecycle

The core of State Street’s new service is integrated into its own Digital Asset Platform (DAP). This is not a new, separate on-chain system, but rather embedding tokenization capabilities into existing fund infrastructure.

Specifically, DAP will support end-to-end operations for tokenized funds:

• Issuance: Creation and minting of tokenized fund shares
• Management: Net asset value calculation, accounting, investor services
• Custody: Secure asset safekeeping and settlement

More critically, the governance design allows digital-native fund structures and traditional fund structures to coexist under a unified governance, risk management, and single client interface, rather than operating separately. This means institutional clients won’t have to choose between the “traditional world” and the “on-chain world”—State Street aims to enable both to coexist seamlessly.

State Street Investment Management will be among the first adopters, playing the role of “internal validation,” paving the way for external clients.

Why Luxembourg? Legal Framework Supports First-Mover Advantage

The choice of location is no coincidence. Luxembourg is the second-largest fund center globally (after the US), with a highly complete fund ecosystem and a clear legal framework supporting digital-native fund structures. In a time when regulators worldwide are still exploring regulations for tokenized funds, Luxembourg offers a relatively certain legal environment, allowing State Street to be an early mover.

Angus Fletcher, Head of Global Digital Asset Solutions at State Street, stated in the official announcement: “This announcement reflects our progress in building infrastructure that enables digital and traditional assets to operate side-by-side within a unified institutional framework. Investment Services focuses on delivering a production-ready set of capabilities, and State Street Investment Management plans to use these services to provide early validation of how tokenization can be applied to existing fund operations.”

Kim Hochfeld, Head of Global Cash and Digital Assets at State Street Investment Management, added: “As an asset manager and a client of State Street Investment Services, we are well-positioned to explore how tokenization can coexist with traditional fund structures. Being an early adopter of tokenization allows us to maintain State Street Investment Management’s core investment discipline, risk controls, and investor protections while upgrading our operations and delivering innovative client experiences.”

It’s worth noting that State Street explicitly reminds in the announcement that service delivery still requires regulatory approval and operational readiness milestones. In other words, timelines and scale remain uncertain—“by the end of the year” is a goal, not a guarantee.

State Street Is Not Alone: The Institutional Tokenization Wave Has Grown in Scale

Placing State Street’s move in the broader industry context, it’s clear that while not the first, it is among the most substantial players in terms of scale.

Recent milestones in institutional tokenization over the past year:

• BlackRock BUIDL: Tokenized US Treasury bond fund surpasses $1 billion in size, with a monthly distribution mechanism attracting continuous institutional inflows
• HSBC Canton Network: Tokenized deposits debut on a public chain, with JPMorgan, DTCC, Franklin, and others following suit
• JPMorgan Public Chain Transactions: First on-chain tokenized Treasury bond trades, settled in collaboration with Ondo Finance and Chainlink, marking a critical point of integration between traditional finance and DeFi infrastructure

The common theme is clear: these institutions are not just “testing the waters,” but are actively laying groundwork—building tokenization infrastructure and establishing market influence and customer stickiness. State Street’s approach from the service side aims to capture the market for custody and management of tokenized funds, rather than just managing its own trillions.

Significance for the RWA Track: The Starting Point of Infrastructure Transformation

RWA has been discussed for years, but the real obstacles have never been just technical—it’s about institutional-grade infrastructure: who will custody? who will handle accounting? how to define legal responsibilities? how to ensure investor protection?

This architecture designed by State Street—unified digital and traditional frameworks, full lifecycle services, single client interface—is systematically addressing these questions. When a custodian managing $54.5 trillion is willing to integrate tokenization into its core services rather than treat it as an “experimental digital asset division,” it signifies a fundamental shift in the entire institutional infrastructure layer: tokenization is no longer optional but will be a standard feature of the future.

For on-chain native RWA protocols, this is a double-edged sword: on one hand, institutional endorsement brings scale and regulatory credibility, greatly raising the market ceiling; on the other hand, with giants like State Street, BlackRock, and JPMorgan actively involved, the moat for traditional institutions at the infrastructure layer is rapidly deepening.