Goldman Sachs and BNY Mellon are set to unveil a platform that would enable institutional clients to trade tokenized shares of money market funds.
Leading media outlet CNBC first learned about the development from executives of the two firms. According to the report, once the platform launches, BNY Mellon clients will be able to invest in tokenized money market funds from various companies.
Notably, top asset managers, including Fidelity Investments, Federated Hermes, and BlackRock, have already signed up for the initiative. Additionally, the asset management arms of BNY Mellon and Goldman Sachs are also involved in the project.
It is worth mentioning that ownership of these money market fund shares will be recorded on the public blockchain of Goldman Sachs.
BNY Exec Confirms Initiative
BNY’s global head of liquidity, Laide Majiyagbe, confirmed the tokenized money market fund initiative. In a statement to CNBC, Laide said BNY and Goldman Sachs have created a solution enabling clients to invest in tokenized money market share classes across multiple fund companies.
According to her, it is imperative to tokenize money market funds, as this helps reduce the friction associated with traditional markets.
For context, money market funds invest in short-term securities, including commercial paper and Treasury bills. This asset class has captured the attention of both retail and institutional investors over the years.
Since 2022, investors have committed over $2.5 trillion to the money market industry as part of efforts to hedge against the Federal Reserve’s interest rate hikes.
Potential Benefits
At the moment, redeeming shares of traditional money market funds can take up to two business days. This is because redemption usually occurs during working hours. However, BNY and Goldman Sachs believe that with tokenized money market funds, trades and redemption can happen in real-time.
Besides speed and ease of use, tokenizing market funds allows financial intermediaries to transfer the asset class without first converting it to fiat currencies. Meanwhile, Matthew McDermott, Goldman Sachs’ global head of digital assets, said this ability could streamline the use of money market funds as collateral for trades.
Both Goldman Sachs and BNY Mellon are convinced that tokenizing the money market industry, estimated at $7.1 trillion, is the next frontier for digital assets following the enactment of the GENIUS stablecoin law.
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