Goldman Sachs and BNY Mellon are joining forces to offer institutional clients access to tokenized money market funds, according to a news release published on Wednesday.
This new service will allow for 24/7 trading, real-time settlement, and blockchain-based ownership tracking. The initiative marks another step in Wall Street’s growing shift toward blockchain-based financial products.
Clients of BNY Mellon, the world’s largest custodian bank, will soon be able to invest in these tokenized funds. Ownership records will be stored directly on Goldman Sachs’ private blockchain.
Laide Majiyagbe, global head of liquidity, financing, and collateral at BNY Mellon, said the company is focused on supporting the financial system’s move toward a “more digital, real-time architecture.”
Other major players involved in the initiative include BlackRock, Fidelity Investments, Federated Hermes, and the asset management divisions of both Goldman Sachs and BNY Mellon.
The move follows on from the recent passing of the GENIUS Act, a new US legislation that provides a regulatory framework for stablecoins. The legislation bans interest-bearing stablecoins, potentially pushing up demand for alternatives like tokenized money market funds.
Though stablecoins do not earn yield, these tokenized funds do and are considered a low-risk vehicle to deal with idle cash. This makes them attractive to hedge funds, pension funds, and large corporations.
Moody’s reported last month that tokenized short-term funds have already reached $5.7 billion in assets since 2021. These funds are usually backed by U.S. Treasurys or other low-risk instruments and work like traditional money market funds.
The difference is that they are written and adhered to on blockchain technology, thereby facilitating faster and cleaner transactions.
The announcement comes hot on the heels of a growing number of companies transitioning to place traditional finance onto blockchain rails. Robinhood CEO Vlad Tenev already announced in advance plans for “Robinhood Chain,” an Ethereum-based layer 2 that will allow customers to trade tokenized stocks and derivatives.
The combined backing of Goldman Sachs, BNY Mellon, and other major financial institutions confirms that tokenization is gaining serious momentum in the world of traditional finance.
