Wall Street giants Goldman Sachs and BNY Mellon are preparing to offer institutional investors access to tokenized money market funds, which could unlock real-time settlement, 24/7 market access and more efficiencies across capital markets.
Clients of BNY Mellon, the world’s largest custodian bank, will soon be able to invest in money market funds whose ownership is recorded directly on Goldman Sachs’ private blockchain, according to a Wednesday press release.
“As the financial system transitions toward a more digital, real-time architecture, BNY is committed to enabling scalable and secure solutions that shape the future of finance,” said Laide Majiyagbe, global head of liquidity, financing and collateral at BNY Mellon.
The initiative includes participation from industry heavyweights such as BlackRock, Fidelity Investments, and Federated Hermes, along with the asset management arms of Goldman and BNY, per the release.
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Ban on interest-bearing stables to spur growth in tokenized funds
The development comes on the heels of the newly signed GENIUS Act, which establishes a regulatory framework for stablecoins in the US. The bill, passed last week with more than 300 House votes, bans interest-bearing stablecoins.
In contrast, tokenized money market funds offer yield, giving hedge funds, pensions and corporations a new tool to manage idle cash with minimal volatility.
In a report last month, Moody’s revealed that tokenized short-term funds have grown to $5.7 billion in assets since 2021 amid growing interest from traditional asset managers, insurers, and brokerages looking to offer clients access between fiat and digital markets.
Typically backed by US Treasurys or other low-risk instruments, these funds function like traditional money market funds but leverage blockchain to issue fractional shares and enable real-time settlement.
Related: Centrifuge brings S&P 500 onchain in tokenized fund launch
Race to bring capital markets on blockchain is on
Earlier this month, Robinhood CEO Vlad Tenev detailed plans for “Robinhood Chain,” an Ethereum-compatible layer 2 on Arbitrum Orbit. The blockchain will let users trade tokenized derivatives of stocks directly on the blockchain, moving asset trading outside traditional exchange hours.
In a July 4 report, Galaxy Digital said Robinhood’s tokenization move removes assets from traditional market channels and brings them onchain, directly challenging the concentrated liquidity and activity that give major TradFi exchanges like the NYSE their edge.
“This directly challenges the deep concentration of liquidity and activity that gives major TradFi exchanges (e.g., NYSE) their competitive advantage,” Galaxy Digital wrote.
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