Archax, a regulated digital asset exchange based in the UK and EU, has launched its innovative Pool Token functionality on the Hedera Network. This development allows for the creation of multi-asset portfolios or baskets on-chain by aggregating various pre-tokenized assets into a single new token. The assets involved can range widely, including debt instruments, exchange-traded products (ETPs), and individual savings accounts (ISAs).
The inaugural Pool Token will include equal contributions from four prominent money market funds managed by industry leaders: Aberdeen, BlackRock, State Street, and Legal & General. This initiative effectively creates a digital “fund of money market funds,” signifying a pivotal step toward the digital transformation of financial markets and providing institutional investors with unparalleled flexibility in portfolio construction and management.
Pool Tokens represent a significant evolution in the realm of investment management, moving away from traditional mutual funds and exchange-traded funds (ETFs) to a model that is more efficient and adaptable. Unlike conventional investment structures, which are often encumbered by various limitations such as fund share classes and custodial regulations, Pool Tokens enable real-time portfolio assembly and instant settlement. This process minimizes the necessity for intermediaries and offers a more streamlined operation by digitally encapsulating the investors’ holdings in the respective funds.
Graham Rodford, co-founder and CEO of Archax, highlighted the transformative nature of this launch, stating that it presents unprecedented flexibility in the formation of portfolios and funds on-chain. He emphasized the opportunity for issuers to create natively digital portfolios, baskets, indices, or funds, allowing for the assembly, transfer, and management of tokenized portfolios with remarkable speed and adaptability. This innovation aims to resolve long-standing operational inefficiencies found in traditional investment structures while ensuring compliance with regulatory standards and maintaining institutional-grade security.
The introduction of Pool Tokens addresses an increasing demand for efficient and cost-effective investment products. While traditional securitization methods have sophisticated advantages, they also tend to be expensive, complex, and operationally burdensome. In contrast, Pool Tokens enable a rapid and composable securitization process that becomes nearly instantaneous and accessible at minimal cost.
The utility of this technology extends beyond merely money market funds, encompassing any assets that can be tokenized and aggregated—such as funds of funds, ETPs, indices, and structured investment offerings. This unique composability facilitates financial engineering that was previously unattainable in conventional markets.
The benefits of this new Pool Token functionality include:
- Instant Fund Creation: By minting a token that encompasses a variety of diverse underlying assets.
- Instant Transfers & Composability: Portfolios can be migrated between platforms in seconds, bypassing cumbersome paperwork and transfer agents, thereby eliminating conventional friction.
- Use of Pool Tokens as Collateral: Archax’s Nest network is designed to support regulated digital assets as collateral for institutional counterparties, extending this capability to Pool Tokens and enabling near-instant settlement, reducing market friction in the process.
Recent use cases, including collaborations with Lloyds Banking Group and Aberdeen Investments, showcase the potential of tokenized real-world asset Pool Tokens. These digital representations, such as money market fund tokens and gilt pool tokens, have been effectively utilized as collateral for foreign exchange (FX) trades.
Archax’s robust tokenization platform, which offers white label solutions, facilitates the creation and management of various Pool Token structures. This capability allows institutional participants to leverage a diverse array of tokenized pool assets as collateral, including fund pool tokens, equity basket tokens, commodity pool tokens, and other real-world asset representations that encompass diversified holdings instead of individual assets.
