Tokenized Money Market Funds Gain Traction With $2.9 Billion In Assets

Tokenization, a process that converts rights to an asset into a digital token on a blockchain, is still in its nascent stages. However, recent developments suggest that the utility of onchain assets is set to evolve further. Currently, stablecoins are the primary real-world asset (RWA) that has achieved significant product-market fit, according to Ondo Finance CEO Nathan Allman. The recent IPO of Circle and the passage of the GENIUS Act have brought stablecoins into the public spotlight, highlighting their growing importance in the financial ecosystem.

While tokenized stocks, bonds, and other assets have yet to reach their full potential, tokenized money market funds are gaining traction. BlackRock, in collaboration with Securitize, launched the USD Institutional Digital Liquidity Fund (BUIDL) in March 2024, which now manages approximately $2.9 billion in assets. This fund has recently been accepted as collateral by certain institutional clients using Crypto.com and Deribit, offering them flexibility in capital allocation while benefiting from the price stability of tokenized Treasurys and the associated yield.

Securitize CEO Carlos Domingo emphasized the evolving role of the fund, stating that it is transitioning from a yield-bearing token into a core component of crypto market infrastructure. Industry experts have noted that tokenized money market funds are not intended to replace the stablecoin market, which is valued at around $240 billion. Instead, they are seen as complementary, with many preferring tokenized funds for collateral management. Standard Chartered’s Waqar Chaudry highlighted this complementary nature, suggesting that both asset classes can coexist and serve different purposes within the financial system.

BlackRock’s Robbie Mitchnick believes that tokenized yield funds will become the predominant cash savings vehicle, while stablecoins will retain their dominance in payments and transactions. The acceptance of BUIDL as collateral by major platforms like Crypto.com and Deribit is a significant step in the tokenization story, potentially accelerating the adoption of tokenized yield funds. This development underscores the growing integration of tokenized assets into the broader financial landscape, offering new opportunities for capital allocation and yield generation.