Major financial institutions Goldman Sachs and BNY Mellon are actively exploring the tokenization of money market funds, specifically tailored for institutional investors.
These initiatives utilize blockchain technology to record fund ownership and enable near real-time settlement capabilities, operational 24 hours a day. The move represents a significant advancement over traditional money market funds, which lack such features.
Tokenized funds offer tangible benefits including fractional ownership and enhanced transaction efficiency due to instantaneous settlement. A key regulatory development, the passage of the GENIUS Act, impacts the sector by explicitly prohibiting tokenized funds from acting as interest-bearing instruments, thereby creating a distinct legal differentiation from stablecoins.
The market for such tokenized short-term funds is expanding rapidly. A recent Moody’s analysis highlights that these assets under management have grown significantly, reaching an estimated $5.7 billion.
The sector is witnessing strong institutional backing, with industry leaders like BlackRock, Fidelity, and Federated Hermes participating alongside Goldman Sachs and BNY Mellon. This growing involvement signals a broader industry pivot towards leveraging blockchain technology to transform traditional capital markets infrastructure for enhanced efficiency and accessibility.