Fidelity Investments' recent move to tokenize its Treasury fund on Ethereum, alongside a sharp decline in Ethereum’s on-chain activity and token burn rate, shows the evolving landscape of blockchain adoption. While major institutions continue to embrace Ethereum for asset tokenization, on-chain data suggests a cooling in network usage — raising questions about how the protocol balances long-term utility, value capture, and its role amid the growing prominence of Layer 2 solutions.
Fidelity Joins Blockchain Race with Ethereum-Based Tokenized Money Market Fund
Fidelity Investments, one of the world’s largest asset managers with $5.8 trillion under management, is making a significant leap into blockchain technology by filing to tokenize one of its money market funds on Ethereum. This move aligns Fidelity with other financial giants such as BlackRock and Franklin Templeton in a growing trend that is reshaping the traditional finance landscape through blockchain-based asset tokenization.
In a March 21 filing with the US Securities and Exchange Commission (SEC), Fidelity revealed plans to introduce an Ethereum-based tokenized share class — dubbed “OnChain” — for its Fidelity Treasury Digital Fund (FYHXX), an $80 million vehicle invested predominantly in US Treasury bills. The OnChain class aims to provide transparent, verifiable tracking of share transactions via Ethereum’s public blockchain, without altering the official record-keeping process maintained by traditional means.
While regulatory approval is still pending, Fidelity noted that the OnChain share class is expected to launch on May 30, 2025.
The OnChain initiative is not a direct tokenization of the underlying US Treasury bills themselves. Instead, it represents a blockchain-based layer of transactional transparency — akin to a mirror ledger — allowing stakeholders to trace movements of shares while maintaining the original ownership records through book-entry systems.
Fidelity emphasized that the blockchain entries will not replace the official ownership ledger. Rather, a transfer agent will reconcile the blockchain data with official records on a daily basis, ensuring accuracy and regulatory compliance.
The strategic embrace of Ethereum by Fidelity further cements the blockchain’s position as the network of choice for institutional adoption. Ethereum already hosts over $3.3 billion worth of tokenized real-world assets (RWAs) — by far the largest share among all blockchain networks, according to analytics from rwa.xyz.
Tokenization of real-world assets, particularly US Treasury bills, bonds, and private credit, has become a growing focus among asset managers in recent years. The market for tokenized Treasury products now stands at $4.78 billion, led by BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), which alone holds $1.46 billion in tokenized value.
Franklin Templeton, another early mover in this space, has also made headlines by tokenizing parts of its money market funds. Fidelity’s entry into this arena not only validates the movement but also adds immense credibility to the thesis that blockchain technology is becoming integral to modern asset management infrastructure.
Fidelity also hinted at future expansions of the OnChain platform to other blockchains, though Ethereum remains the centerpiece for now.
Ethereum: The “Natural Default” for TradFi Tokenization
The dominance of Ethereum in the tokenized asset space was recently reaffirmed by Robbie Mitchnick, BlackRock’s Head of Crypto. Speaking at the Digital Asset Summit in New York on March 20, Mitchnick stated unequivocally that Ethereum was the obvious choice for launching tokenized financial products.
“There was no question that the blockchain we would start our tokenization on would be Ethereum, and that’s not just a BlackRock thing, that’s the natural default answer,” Mitchnick said.
He cited Ethereum’s credibility, decentralization, and security as key factors that give it a competitive edge in institutional adoption. His remarks signal a growing consensus in the traditional finance sector — Ethereum is not just a speculative asset platform, but the foundational layer for the next generation of financial infrastructure.
Fidelity’s move may serve as a catalyst for more widespread institutional adoption of blockchain-based financial products. As trust builds around the technology’s transparency and efficiency, more funds — ranging from Treasuries to corporate debt and private equity — could find their way onto blockchains.
Moreover, tokenized funds offer numerous benefits to investors, such as near-instant settlement, 24/7 trading, and improved liquidity, all of which contrast starkly with the friction-prone nature of traditional financial markets.
As of now, the OnChain class is not available for direct trading on decentralized exchanges. However, the infrastructure being laid out by firms like Fidelity and BlackRock suggests that a future where tokenized assets are freely tradable across global markets — both institutional and retail — may not be far off.
Ethereum Burn Rate Hits Historic Low as Network Activity Slumps
In other news, Ethereum, the second-largest blockchain by market capitalization, is showing signs of significantly reduced demand as network activity declines across the board. The amount of ETH burned on Saturday as part of Ethereum’s transaction fee mechanism hit an all-time low of just 53.07 ETH — a stark indicator of waning usage of Ethereum’s blockspace.
This dramatic slowdown in ETH burning reflects broader declines in on-chain activity, with key metrics such as active addresses, transaction volumes, and new address creation all trending downward in recent weeks.
The ETH burning mechanism was introduced with EIP-1559 in August 2021, a pivotal update that restructured Ethereum’s transaction fee model. Under the new system, users pay a base fee for each transaction, which is algorithmically adjusted based on network demand. Crucially, this base fee is burned — permanently removing ETH from circulation — with the intent to offset inflation and, during high usage, potentially make Ethereum a deflationary asset.
However, the effectiveness of this mechanism is heavily dependent on network activity. The more transactions occur, the more ETH is burned. Conversely, during periods of low demand, the burn rate drops — and that's exactly what’s happening now.
According to data from Ultrasound.money, based on current burn rates, Ethereum’s supply is now projected to grow by 0.76% annually — signaling a return to net inflationary dynamics.
The low burn rate is just one symptom of Ethereum’s recent malaise. The seven-day moving average of active addresses has fallen to its lowest level since October 2024. Similarly, new address creations, daily transaction counts, and on-chain volume have all seen marked declines throughout March.
These metrics point to a broad cooling-off period for Ethereum’s mainnet, despite the proliferation of Layer 2 solutions — scaling platforms built atop Ethereum to reduce congestion and fees.
Layer 2s Gaining Traction — at Ethereum’s Expense?
One factor in Ethereum’s on-chain slowdown may ironically be the success of its Layer 2 ecosystem. Platforms such as Arbitrum, Optimism, and Base (developed by Coinbase) have grown rapidly in scale and adoption, siphoning off transactions that would have otherwise been processed directly on Ethereum’s base layer.
This shift has led some analysts to question the long-term economic impact on Ethereum’s mainnet. Notably, Standard Chartered recently slashed its Ethereum price target for 2025 from $10,000 to $4,000, citing the rise of Layer 2s and their increasing control over Ethereum’s transaction flow.
While some see the decline in activity as temporary — perhaps a result of broader market cooldowns or anticipation of future upgrades — others view it as a structural shift in Ethereum’s role within its own ecosystem. As more users and developers migrate to faster, cheaper Layer 2 chains, the base layer risks becoming a low-volume settlement layer rather than a vibrant hub of decentralized activity.
Still, Ethereum’s core developers have long anticipated this shift and continue to prioritize upgrades that will optimize the network’s role as a secure, decentralized foundation for scalable blockchain applications.
The question now is whether Ethereum can continue to deliver enough economic value to support its long-term bullish thesis — particularly as competitors like Solana and Avalanche push forward with their own low-cost, high-speed networks.
Ethereum’s burn mechanism was hailed as a game-changer in 2021, with early post-EIP-1559 burn rates triggering speculation about ETH becoming a “ultrasound money.” But as this past weekend’s record-low burn shows, the mechanism’s power is tied directly to user demand — and that demand appears to be fading, at least for now.
Unless usage picks up, either via a broader crypto market rally, major application launches, or a new wave of institutional interest, Ethereum’s supply may continue to inflate — challenging a key pillar of the bullish ETH narrative.
