Mutual fund news source ignites published an article late last week titled "Fund Shops Race to Launch Stablecoin Reserve Money Funds," which tells us, "Traditional asset managers are rolling out a wave of government money market funds tailored specifically to stablecoin reserves, positioning themselves to capture institutional cash ahead of expected regulatory mandates. Firms including Morgan Stanley, State Street, BNY and Goldman Sachs have launched products over the past several months aimed directly at digital asset issuers. The Guiding and Establishing National Innovation for U.S. Stablecoins, or Genius, Act, which passed last year, mandated that [U.S. domiciled] stablecoin issuers back their tokens with highly liquid, low-risk assets like cash, overnight repurchase agreements and U.S. Treasurys." (Note: Please join us for our upcoming European Money Fund Symposium conference, which will be held Sept. 24-25 in Paris, France!)
They explain, "The immediate commercial case for these vehicles remains an open question. The underlying portfolios hold basic short-term government debt, and a single product -- the $61.9 billion Circle Reserve Fund, managed by BlackRock -- controls nearly 90% of the $69.1 billion, 15-fund stablecoin reserve money market fund space, according to Crane Data. From a legal and portfolio management perspective, stablecoin reserve funds are virtually indistinguishable from standard government money market funds."
The article continues, "Launching a registered money market fund to serve as a Genius Act reserve vehicle does not require special Securities and Exchange Commission exemptive relief, said Jamie Gershkow, partner-in-charge at Stradley Ronon's New York office. The funds still meet the definition of a government money market fund under Rule 2a-7, permitting the use of amortized cost valuation and exempting them from liquidity fee provisions, she noted. The primary structural difference is a tighter maturity cap. While standard 2a-7 funds can hold individual government securities maturing in up to 397 days, Genius Act-compliant funds must restrict their universe to Treasurys maturing in 93 days or less, Gershkow said."
The ignites piece says, "Further, data shows asset managers are not using the digital asset positioning to hike fees. Stablecoin reserve money market funds charge an average expense ratio of 16 basis points, compared to 24 bp across all institutional government money funds, according to Crane Data. 'While most no doubt think they will get future stablecoin money, it's a cheap and easy way to put a high-tech sheen on their fund lineups and companies,' Peter Crane, president of Crane Data, wrote in an email. Despite the flurry of new products, the stablecoin reserve market currently operates as a near-monopoly. Tether and Circle account for roughly 90% of the $300 billion global stablecoin market."
It adds, "Meanwhile, newly launched funds from legacy managers are sitting on minimal seed capital, Crane Data shows. State Street's Capital stablecoin reserve fund held $120 million as of late July, while the Goldman Sachs fund held $104 million, BNY's Dreyfus fund held $51 million and Morgan Stanley held $5 million, according to Crane Data. The strategy of launching stand-alone funds without pre-committed stablecoin partners relies heavily on looming regulatory mandates, industry attorneys say."
Finally, ignites states, "The industry is awaiting final implementing regulations from the Office of the Comptroller of the Currency, which are expected to explicitly address reserve asset diversification, Gershkow noted. If the OCC mandates that stablecoin issuers cannot hold all of their reserves with a single custodian or manager, a forced redistribution of assets will follow. Managers launching 93-day funds today are effectively establishing turnkey wrappers to capture those mandated flows."
In related news, Bloomberg published the piece, "BlackRock Launches Tokenized Money Market Funds in Europe." They explain, "BlackRock Inc. is bringing blockchain technology to its flagship money market funds in Europe, in the latest sign of Wall Street's growing ambition to expand use of digital-asset technology in mainstream finance." (See also yesterday's Crane Data News, "BlackRock Launches BRSRV Tokenized Money Fund; Aviva Tokenized USD.")
They state, "The world's largest asset manager will offer tokenized versions of select existing BlackRock Institutional Cash Series money market funds, which manage a combined $311 billion in assets, the company said in a statement on Tuesday. The offering will include sterling, euro and US-dollar-denominated share classes. Each digital token is equivalent to a share in the underlying money market fund, which investors will be able to transfer around-the-clock, directly between approved digital wallets, the company said."
The article says, "Tokenization is the use of crypto's underlying technology to issue traditional financial assets digitally, with the aim of making them easier and faster to transfer and settle, 24/7. Large financial institutions have ramped up their tokenization efforts over the past year as President Donald Trump's administration has taken a more supportive stance toward digital assets, which has encouraged banks, asset managers and other financial firms to step up their blockchain initiatives. The market value of tokenized assets has surged to roughly $37 billion, according to data provider rwa.xyz."
It tells us, "BlackRock, for one, has seen interest from a range of potential clients, including retail distributors who offer digital wallets, corporate treasurers beginning to use tokenized forms of cash, and capital markets participants looking for more efficient forms of collateral, Beccy Milchem, global head of cash distribution and head of the international cash management business, said in an interview."
Bloomberg comments, "Money market funds have emerged as one of the fastest-growing areas of tokenization. The funds invest in short-term, low-risk securities such as Treasury bills and commercial paper and, unlike stablecoins -- which are cryptocurrencies pegged to assets such as the US dollar -- generate a yield for investors while seeking to maintain a stable value. That has led some firms to position tokenized money market funds as a complementary or alternative way to hold cash equivalents on blockchain networks."
They write, "The latest batch of BlackRock money market funds will be tokenized using JPMorgan's Kinexys blockchain-based platform, the companies said. The bank will also continue to act as a transfer agent for the funds. 'We see it as a real opportunity to modernize market infrastructure and the ability to do peer-to-peer transfers appealed to some corporates as they look at how they do intra-company payments,' Hannah Winter, head of digital cash at BlackRock, said in an interview."
Finally, Bloomberg adds, "BlackRock was an early entrant into the tokenized funds build-out with its BlackRock USD Institutional Digital Liquidity Fund, known as BUIDL, which has swelled to about $2.7 billion since debuting in 2024, according to rwa.xyz. Chief Executive Officer Larry Fink has been one of tokenization's most vocal advocates on Wall Street."
