Federated Hermes joins Wall Street's tokenization push with plans for first onchain fund shares
Federated Hermes, the Pittsburgh-based asset manager overseeing about $911 billion in assets, said it is teaming up with Prometheum to create blockchain-based share classes of its funds that can be held in traditional brokerage accounts. The move, first reported by CoinDesk on Oct. 13, 2026, positions Federated Hermes among a growing set of legacy financial institutions experimenting with tokenized securities and onchain fund shares for mainstream investors.
Why this matters for crypto markets
The announcement is notable because it bridges institutional asset management and retail distribution channels by packaging tokenized fund shares for custody in standard brokerage accounts. Tokenization of fund shares converts conventional NAV-based securities into digital objects that can be recorded and transacted on a blockchain, potentially enabling more automated settlement, programmable corporate actions and easier fractional ownership. For crypto markets, the development signals further mainstream validation of blockchain-based securities infrastructure beyond niche use cases and could expand demand for regulated custody, settlement rails and token engineering services.
From an onchain activity perspective, successful deployment could increase transaction volumes and smart-contract usage on whichever blockchain networks are chosen for issuance. That, in turn, could lift demand for infrastructure that supports tokenized securities: regulated custody, secure key management, compliance tooling, and regulated trading venues or alternative trading systems capable of handling tokenized instruments. Major smart-contract platforms such as Ethereum have been a frequent foundation for security token pilots, so broader adoption might also influence ERC-based token standards and related middleware.
Implications for institutions, regulation and market structure
For institutions, Federated Hermes’s step into tokenized share classes highlights commercial interest in modernizing fund distribution and settlement. Broker-dealers and custodians will need to integrate with token issuance platforms and reconcile onchain records with traditional back-office ledgers. Custody providers and prime brokers may find new revenue opportunities if they can offer compliant safekeeping and staking of tokenized assets, while market-makers and liquidity providers will be important to ensure tradability and tight spreads for onchain share classes.
Regulatory oversight will be a central consideration. Tokenized fund shares that are offered to retail and institutional brokerages must meet securities laws and regulatory requirements applicable to funds and broker custody. The move may spur more detailed guidance from securities regulators on how onchain securities are treated for disclosure, investor protections, custody and recordkeeping. Market infrastructure — including trading venues, supervisor and reconciliation workflows — will need to adapt to ensure compliance and operational resilience.
While the announcement does not specify which blockchain or token standards will be used, the broader trend intersects with stablecoin and payments infrastructure because tokenized securities often rely on programmable settlement rails and sometimes on fiat-linked settlement layers. The integration of tokenized fund shares into mainstream brokerages could therefore increase attention on the intersection of stablecoins, payment settlement finality and regulated custody models.
Market participants will be watching several developments closely: regulatory clarifications and approvals related to tokenized securities, technical details about the blockchain and custody architecture chosen by Federated Hermes and Prometheum, rollout timelines and which broker-dealers will support the onchain share classes, and early liquidity and trading patterns once the shares are live. The pace at which other large asset managers move from pilots to live offerings will also be a key barometer of institutional tokenization momentum.