Ethereum as the Foundation for Institutional On-Chain Finance

The rise of tokenized money market funds (TMMFs) has redefined institutional finance, enabling real-time settlement, programmable compliance, and seamless integration with decentralized finance (DeFi). At the heart of this transformation lies Ethereum, which has emerged as the dominant settlement layer for institutional-grade tokenized assets. This article examines why Ethereum outperforms competitors like Solana, Polygon, and Stellar in this critical use case, drawing on institutional adoption, infrastructure maturity, and regulatory alignment.

Institutional Adoption and Ecosystem Momentum

Ethereum's dominance in tokenized money market fund settlements is underscored by its adoption by global financial giants. JPMorgan Chase, the largest global systemically important bank, launched its first tokenized money market fund, My OnChain Net Yield Fund (MONY), on Ethereum in December 2025. Seeded with $100 million in capital and accessible to qualified investors via USDC or cash, MONY represents a strategic bet on Ethereum's institutional-grade infrastructure according to reports. Similarly, BlackRock's BUIDL fund, which debuted on Ethereum in 2024, has grown to $2 billion in assets under management (AUM), making it the largest TMMF according to data. Franklin Templeton's BENJI token, part of its OnChain US Government Money Fund, further reinforces Ethereum's role as the settlement layer of choice for U.S. Treasury-backed assets according to reports.

These initiatives are not isolated. The broader tokenized real-world asset (RWA) market has surged to $19 billion, with TMMFs accounting for a significant share. . Circle's USYC tokenized money market fund, now holding $1.3 billion in assets, has expanded its utility as collateral on Binance, while DeFi protocols like Pendle and MakerDAO integrate tokenized Treasuries for yield and rate discovery according to research. This ecosystem-wide adoption highlights Ethereum's ability to bridge traditional finance (TradFi) and DeFi.

Infrastructure Maturity and Security

Ethereum's robust smart contract capabilities and network stability are critical differentiators. By late 2025, Ethereum accounted for 50% of total value locked (TVL) in TMMFs, driven by its capacity to handle complex institutional workflows. Unlike alternative blockchains such as Stellar or Solana, Ethereum's security model-rooted in proof-of-stake (PoS) and a mature validator ecosystem-provides the assurance required for high-value settlements. For instance, JPMorgan's JPM Coin, issued on Base (an Ethereum Layer 2), leverages Ethereum's security while enabling real-time transactions for institutional clients according to official sources.

Moreover, Ethereum's interoperability with Layer 2 solutions and cross-chain bridges allows institutions to balance speed and security. While Solana and Polygon offer lower transaction costs, their networks lack the regulatory clarity and institutional trust that Ethereum has cultivated over years. This is evident in BlackRock's expansion of BUIDL to Ethereum-compatible chains like Polygon and Avalanche, which prioritize Ethereum's security guarantees while optimizing for scalability according to market analysis.

Regulatory Clarity and Compliance

Regulatory alignment has been a cornerstone of Ethereum's success in institutional finance. The U.S. GENIUS Act, enacted in 2025, provided a legal framework for stablecoins and tokenized assets, enabling platforms like JPMorgan and BlackRock to launch SEC-registered TMMFs on Ethereum. This clarity contrasts sharply with the regulatory ambiguity faced by alternative blockchains, where projects often operate in legal gray areas.

Franklin Templeton's early adoption of tokenized funds on Ethereum and Stellar underscores the importance of compliance. However, its shift toward Ethereum for larger institutional deployments highlights the chain's superior alignment with U.S. regulatory expectations according to industry reports. Similarly, WisdomTree's 13 tokenized mutual funds, deployed on Ethereum and Arbitrum, reflect a strategic focus on jurisdictions with clear compliance pathways according to market analysis.

DeFi Integration and Yield Innovation

Ethereum's settlement layer is not just a conduit for institutional assets but also a catalyst for DeFi innovation. Tokenized Treasuries, such as USDtb from Ethena and OUSG from Ondo Finance, are now inputs for decentralized yield strategies, enabling institutional-grade collateral to power DeFi primitives like lending and synthetic assets according to research. This integration is further amplified by platforms like Flux Finance, which facilitate real-time rate discovery using tokenized RWA according to industry analysis.

The shift from stablecoin-centric DeFi to tokenized RWA-based systems is a testament to Ethereum's adaptability. As noted by the Bank for International Settlements (BIS), TMMFs on Ethereum are increasingly replacing stablecoins as the foundation for DeFi, offering a risk-free, yield-bearing alternative to dollar-pegged tokens. This trend is supported by JPMorgan's MONY fund, which mirrors traditional money market fund structures while enabling on-chain programmability according to official sources.

Competitors and the Limits of Interoperability

While Ethereum dominates, competitors like Solana and Polygon are not without merit. JPMorgan's recent commercial paper offering on Solana and BlackRock's expansion to multiple chains illustrate a growing emphasis on interoperability according to industry reports. However, these efforts often serve as complementary rather than competitive strategies. For example, JPMorgan's hybrid model combines private, permissioned blockchains for internal ledger management with public Ethereum-based settlements for cross-border transactions according to analysis. This layered approach reflects the reality that Ethereum's security and regulatory alignment remain irreplaceable for core institutional settlements.

Risks and the Path Forward

Despite its strengths, Ethereum's dominance is not without risks. The BIS has warned of liquidity mismatches and interconnectedness between traditional and digital asset ecosystems, particularly as TMMFs grow in scale. Additionally, the reliance on Ethereum's settlement layer could create systemic bottlenecks if demand outpaces infrastructure upgrades. However, Ethereum's ongoing upgrades-such as the EIP-4844 (Proto-Danksharding) roadmap-aim to address scalability concerns while maintaining security according to industry experts.

Conclusion

Ethereum's position as the settlement layer for tokenized money market funds is underpinned by institutional adoption, regulatory clarity, and ecosystem innovation. While alternative blockchains offer cost and speed advantages, they lack the security, compliance frameworks, and institutional trust that Ethereum has cultivated. As TMMFs continue to displace traditional settlement mechanisms, Ethereum's role as the foundation for institutional on-chain finance is likely to solidify, positioning it as a critical infrastructure asset for the future of global finance.