Fidelity Moves Into Ethereum Tokenization as Tornado Cash Lawsuit Takes New Turn

Two major developments this week highlight the contrasting paths of traditional finance and crypto privacy advocates within the blockchain space.

Fidelity Joins Blockchain Tokenization Push

Fidelity Investments, one of the largest asset managers in the world, is taking another step into blockchain innovation by registering a tokenized version of its US dollar money market fund on Ethereum. The filing, submitted to the U.S. Securities and Exchange Commission (SEC) on March 21, outlines the launch of a new share class—dubbed “OnChain”—designed to enhance transparency and traceability for the $80 million Fidelity Treasury Digital Fund (FYHXX).

While the tokenized shares won’t replace Fidelity’s traditional ownership records, the firm stated that blockchain-based transactions will be reconciled daily with its official ledger. Notably, the U.S. Treasury bills backing the fund won’t be tokenized directly, but the initiative signals a broader push by Fidelity into digital asset infrastructure.

Pending regulatory approval, OnChain is expected to go live by May 30. The firm also hinted at future plans to expand to other blockchain networks.

This move places Fidelity alongside other institutional giants like BlackRock and Franklin Templeton in the rapidly growing real-world asset (RWA) tokenization market. According to data from rwa.xyz, the market for tokenized Treasury products is now valued at nearly $4.8 billion, with over $3.3 billion hosted on Ethereum alone.

Tornado Cash Lawsuit: Treasury Seeks to End Case After Delisting

While traditional finance edges closer to blockchain integration, the privacy-focused side of crypto continues to battle legal headwinds. On the same day as Fidelity’s filing, the U.S. Treasury Department formally removed Tornado Cash and several associated smart contract addresses from its sanctions list—yet it now claims that no final court judgment is necessary in the ongoing lawsuit.

The Office of Foreign Assets Control (OFAC) originally blacklisted Tornado Cash in 2022, citing its alleged use by North Korea’s Lazarus Group for laundering illicit funds. A group of users, backed by Coinbase and led by Ethereum developer Preston Van Loon, sued the Treasury, arguing that the sanctions violated constitutional rights.

After months of legal back-and-forth, including a Texas court ruling partially in favor of Tornado Cash in January 2024, Treasury’s delisting was seen by some as a concession. However, Coinbase Chief Legal Officer Paul Grewal contends that the government is attempting to sidestep a full judicial review by claiming the case is now moot.

“The law is clear—removing Tornado Cash from the list doesn’t prevent the Treasury from relisting it in the future,” Grewal said, referencing Supreme Court precedent that voluntary policy reversals don’t automatically nullify lawsuits.

The legal uncertainty surrounding Tornado Cash persists, especially as its founders remain entangled in criminal proceedings. Roman Storm, one of the protocol’s co-founders, faces trial in April, while fellow founder Roman Semenov is still wanted by the FBI. Developer Alexey Pertsev, previously jailed in the Netherlands, was recently released pending appeal of a money laundering conviction.

Fidelity’s move highlights how blockchain is becoming increasingly accepted in traditional finance circles, especially for improving transparency and efficiency. At the same time, the Tornado Cash case serves as a reminder of the ongoing tensions between decentralization, privacy, and regulatory oversight.

As institutions tokenize assets on public blockchains and regulators refine their stance on crypto, the future of Web3 will likely be shaped by how these parallel paths continue to unfold.