How to Tokenize a Fund: A Step-by-Step Guide

Tokenized assets outstanding crossed approximately $26 billion in March 2026, up from roughly $6.7 billion twelve months earlier, according to RWA.xyz data retrieved March 7, 2026. That's a derived figure representing roughly 4x growth, calculated directly from those two RWA.xyz data points. For asset managers still treating fund tokenization as a future consideration, the window for "wait and see" has closed.

What Does It Mean to Tokenize a Fund?

Fund tokenization converts LP interests or share classes into digital tokens on a blockchain, where each token represents a legally recognized ownership stake in the fund. The underlying assets don't change. A tokenized private credit fund still holds loans. A tokenized real estate vehicle still owns property. What changes is the infrastructure layer: how ownership is recorded, transferred, and administered.

That distinction matters. Tokenization isn't a speculative bet on crypto markets; it's an infrastructure decision. The fund's investment mandate stays intact. What you're replacing is the paper-based, manually reconciled cap table with an immutable on-chain record.

Why now? Institutional interest is accelerating for concrete operational reasons: 24/7 settlement capability, fractional ownership enabling lower minimums, programmable compliance that automates transfer restrictions, and the potential for secondary liquidity in traditionally illiquid structures. BlackRock's BUIDL money market fund launched in March 2024 and surpassed $500 million in AUM within weeks, according to a Securitize press release dated May 2024. Franklin Templeton's BENJI fund, which tokenizes a money market fund on public blockchains, had been operating since 2021 and demonstrated that institutional-grade fund tokenization at scale is achievable. These aren't experiments anymore.

BCG's "Tokenization of Assets" report (2022, updated projections cited in BCG Global Asset Management Report 2024) projects the tokenized asset market could reach $16 trillion by 2030. Roland Berger's "Asset Tokenization" report (2024) specifically projects the tokenized real estate market reaching $3 trillion by 2030. Starke Finance notes that the 15% figure sometimes cited in relation to this projection is a derived estimate: it divides the $3 trillion Roland Berger forecast by a total real estate AUM denominator of approximately $20 trillion, sourced from MSCI Real Assets 2024 research. Readers should treat that percentage as illustrative, not a directly published figure.

Step 1 — Legal and Regulatory Structuring

Start here. Everything downstream depends on getting the legal foundation right.

Choose your fund vehicle carefully. Delaware LP and LLC structures remain the dominant choice for U.S. managers; they're well-understood by institutional LPs, have established case law, and offer flexibility in drafting operating agreements that recognize on-chain records. Offshore managers typically look to Cayman or BVI structures, though those come with their own regulatory considerations.

Tokens representing fund interests are almost certainly securities under the Howey Test. That's not a problem, but it does require proper exemptions. Reg D 506(c) is the most common path for U.S. managers targeting accredited investors, permitting general solicitation while requiring verified accreditation. Reg S covers offshore offerings. Engage securities counsel before you touch any technology decisions. Firms like Goodwin Law, which has deep experience in both fund formation and digital asset securities, are the right starting point.

The LPA or operating agreement must be amended to explicitly recognize on-chain token records as the authoritative cap table. Without that language, you have a legal ambiguity that will surface at the worst possible time, typically during a transfer dispute or an audit.

KYC and AML obligations don't disappear because ownership moved on-chain. Whitelisting and transfer restrictions must be encoded at the token level, not bolted on afterward. On the regulatory front, the SEC issued Staff Bulletin No. 121 (March 2022) addressing custodial obligations for digital assets, and the CFTC issued No-Action Letter 23-07 (September 2023) addressing digital assets as margin collateral. Both signal constructive regulatory engagement with compliant infrastructure. Legal counsel should verify current applicability before relying on either position, as regulatory guidance in this area continues to evolve.

Step 2 — Custody, Technology, and Blockchain Selection

Custody in a tokenized fund isn't a single question. It's three distinct problems that require separate answers.

Fund holdings custody. Who holds the underlying assets the fund invests in? In Starke's FTaaS architecture, fund managers don't have direct access to the holdings. Instead, a Solana program governs the fund's on-chain portfolio. The fund manager's role is limited to deciding which tokens the fund should hold; the program itself executes those decisions and recalculates NAV every minute based on current market prices of the holdings. Program authority is secured through a multisig arrangement, meaning no single key can unilaterally move fund assets. This design separates investment decision-making from asset custody at the protocol level.

Investor wallet custody. How do investors hold their fund shares? Starke's platform gives investors two options at registration: a self-custody embedded wallet with MPC key management (powered by Dynamic.xyz), or the ability to connect an existing third-party wallet such as Phantom or Solflare. Investors don't need to understand key management; the embedded wallet handles that transparently. Looking ahead, Starke plans to integrate custodian providers (such as BitGo) so that investors who require institutional-grade custody can store their fund share tokens in a custodian-managed wallet linked to their platform account, alongside their self-custody option.

Token architecture. FTaaS leverages and wraps existing SPL tokens on Solana. Fund shares are represented as tokens that the Solana program mints and manages according to the fund's rules. Transfer restrictions, investor whitelisting, and redemption logic are enforced programmatically. The Token-2022 standard with transfer hook extensions allows compliance checks to execute automatically on every transfer attempt; non-whitelisted wallets are rejected before the transaction settles.

Blockchain selection isn't a branding exercise. Evaluate on settlement finality, transaction cost, institutional tooling availability, and network reliability. As of March 7, 2026, Solana's average transaction fee was approximately $0.00025, with over 1,400 active validators, per Solscan and Solana Beach data retrieved that date. Processing daily NAV updates, subscription confirmations, and distribution events on a network where each transaction costs fractions of a cent changes the unit economics of fund administration meaningfully compared to networks where gas fees can spike unpredictably.

Any smart contract governing issuance, transfers, or distributions must be independently audited before going live. No exceptions. An unaudited contract managing investor capital is an unacceptable operational risk, regardless of how confident the development team is. For infrastructure providers, ISO 27001 and SOC 2 certifications are baseline requirements. If a provider can't demonstrate both, move on.

Step 3 — Issuance, Investor Onboarding, and Cap Table Management

The issuance workflow follows a clear sequence. Tokens are minted by the fund's Solana program into a treasury account. Upon subscription, the investor completes KYC clearance through the onboarding flow and is whitelisted on-chain. Once verified, tokens transfer from the treasury to the investor's wallet, whether that's the embedded self-custody wallet or a connected external wallet. Redemptions reverse the process: tokens return to treasury, and the investor receives the corresponding value.

One point that often surprises TradFi managers: investors don't need to manage private keys. The embedded wallet with MPC key management abstracts the entire blockchain layer. From the LP's perspective, they see a dashboard showing their fund share balance and NAV, just as they'd see a capital account statement today. For investors who prefer their own wallet infrastructure, the connect-wallet option accommodates that without changing the fund's compliance enforcement.

The cap table benefit is significant. Every subscription, transfer, and redemption is recorded immutably on-chain, with timestamps and wallet addresses. Fund administrators no longer reconcile between transfer agent records, custodian records, and LP statements. There's one source of truth. Citi GPS's "Money, Tokens and Games" report (March 2023) estimated meaningful reductions in fund administration overhead as a direct result of this reconciliation simplification; the report does not publish a single universal cost-reduction figure, as outcomes vary by fund structure and administrator, so managers should request fund-specific modeling from their administrator.

Distribution mechanics improve materially. Because the Solana program recalculates NAV every minute based on the fund's current holdings, distributions can be triggered programmatically based on predefined conditions, reducing the manual wire processes that currently require fund administrators to coordinate across time zones and banking systems. Secondary transfer controls, including lock-up enforcement, right-of-first-refusal clauses, and accredited investor verification, execute automatically through smart contract logic rather than relying on manual compliance review.

Traditional private fund subscription cycles commonly run T+5 to T+10, based on standard industry practice for private fund administration. On-chain issuance compresses that materially, with settlement finality achievable in seconds once KYC clearance is confirmed.

Choosing the Right Fund Tokenization Infrastructure Partner

Not all tokenization platforms are equivalent, and the differences compound over time. Evaluate providers on regulatory track record, blockchain expertise, legal counsel relationships, and ongoing fund administration support. A platform that can issue tokens but can't support ongoing NAV reporting, distribution events, or investor transfers at scale isn't a complete solution.

Ask direct questions. Does the provider hold ISO 27001 and SOC 2 certifications? Who is their legal counsel, and do they have documented experience with fund securities? What's their process for handling investor whitelisting updates when an LP's accreditation status changes? How is fund asset custody structured, and what separation exists between the fund manager's decision authority and the actual movement of assets?

The build-versus-buy decision deserves honest analysis. Building tokenization infrastructure in-house requires blockchain engineering talent, smart contract auditing, legal structuring expertise, and ongoing maintenance. Time-to-market is measured in quarters, not weeks, and the compliance burden sits entirely with the manager. White-label platforms reduce engineering overhead but may limit customization. Fund Tokenization-as-a-Service models allow asset managers to launch tokenized funds on institutional-grade infrastructure without building or maintaining the underlying stack, with the provider absorbing the technical and compliance infrastructure burden.

The managers who've already worked through the legal structuring, technology selection, and operational workflows will be positioned to move quickly as LP demand for tokenized access increases. The ones still evaluating will be catching up.

Explore how Starke's Fund Tokenization-as-a-Service infrastructure works, from legal structuring support to on-chain issuance and cap table management.

Data as of March 7, 2026. This content is for informational purposes only and does not constitute legal, investment, or regulatory advice. Forward-looking statements and market projections are subject to significant uncertainty and may not materialize. Regulatory guidance on digital asset securities continues to evolve; consult qualified legal counsel before making structuring decisions. Past performance is not indicative of future results.