Goldman Sachs and Bank of New York Mellon (BNY Mellon) have announced a collaborative project to offer tokenised money market funds to institutional investors. These intend to transform the $7.1 trillion money market sector through blockchain technology.
Traditionally focused on low-risk, short-term debt securities, money market funds will now be digitised on Goldman Sachs’ blockchain platform, allowing ownership to be securely recorded and transferred more efficiently. BNY Mellon clients will be among the first to access these tokenised funds.
Major players like BlackRock, Fidelity Investments, and Federated Hermes have joined the initiative, alongside the asset management divisions of Goldman Sachs and BNY Mellon. This comes as the U.S. recently passed the GENIUS Act, establishing a regulatory framework for stablecoins, which large banks such as JPMorgan Chase and Bank of America are exploring for payments.
Unlike stablecoins, tokenised money market funds pay yields, making them appealing to hedge funds, pension schemes, and corporations seeking secure, productive cash management.
Laide Majiyagbe, BNY Mellon’s global head of liquidity, financing and collateral, said, “We have created the ability for our clients to invest in tokenized money market share classes across a number of fund companies. The step of tokenizing is important, because today that will enable seamless and efficient transactions, without the frictions that happen in traditional markets.”
The tokenisation could enable a real-time, always-on digital ecosystem where these funds are traded easily, and exchanged between intermediaries without liquidating to cash first. This would expand their use as collateral for trades and margin requirements.
“The sheer scale of this market just offers a huge opportunity to create a lot more efficiency across the whole financial plumbing. That is what’s really powerful, because you’re creating utility in an instrument where it doesn’t exist today,” stated Mathew McDermott, Goldman Sachs’ global head of digital assets.
Since the Federal Reserve began raising interest rates in 2022, money market funds have seen around $2.5 trillion in inflows, illustrating strong investor demand.