US financial giants Goldman Sachs and BNY Mellon are launching a new blockchain-based investment platform for institutional investors. According to CNBC, this new platform will allow institutional actors such as hedge funds, pension funds, and corporate treasuries to access tokenized money market funds. The system reportedly has the support of industry heavyweights such as BlackRock, Fidelity, and Federated Hermes.
Financial giants meet on tokenization
Tokenized money market funds, digital assets registered on the blockchain, offer investors real returns compared to stablecoins. Their low-risk and high-liquidity nature makes them an ideal cash management tool for institutional investors. Laide Majiyagbe, BNY Mellon's global head of liquidity and collateral operations, said, "We've enabled our clients to invest in tokenized money market share classes from many fund companies. Tokenization eliminates the friction inherent in traditional markets by enabling seamless and efficient transactions." She highlighted the advantages of the platform. These funds are typically investment funds that invest in safe assets such as Treasury bonds, repurchase agreements, and short-term commercial paper. This means they possess cash-like liquidity while offering a modest return. Furthermore, tokenized versions eliminate the limitations of traditional money market funds, such as being traded only during market hours.
Under the new system, BNY Mellon's institutional clients will have direct access to the digital share classes of the mutual funds. These shares will be recorded and tracked on Goldman Sachs' private blockchain network, enabling faster and more transparent transactions. Tokenizing these types of funds offers significant advantages, including increased efficiency in asset management, reduced transaction costs, and optimized capital allocation.
A pilot program began in 2024
This initiative is a continuation of a pilot program conducted in March. In March 2024, Goldman Sachs, BNY Mellon, and other financial institutions established a test network on the "Canton Network," developed by Digital Asset, to test the transfer and exchange of tokenized assets. Fifteen asset managers, 13 banks, four custodians, and three exchanges participated in this pilot. The testing process demonstrated how tokenized funds could operate with lower risk and faster transaction capacity.
Another advantage offered by tokenized money market funds is that they represent a potential alternative to stablecoins. While stablecoins are generally viewed as stores of value due to their pegged structure of $1, their lack of interest income poses a disadvantage in long-term use. In contrast, tokenized money market funds leverage the technological advantages offered by blockchain and can offer investors a real return.
