JP Morgan believes that the tokenization of money market funds can be an important breakthrough in preserving the attractiveness of 'cash assets' even amid the threat of stablecoin proliferation. As investors are drawn to stablecoins, weakening the competitiveness of existing financial products, money market funds are adapting to the digitalization trend.
JP Morgan strategist Teresa Ho mentioned that Goldman Sachs and New York Mellon Bank have begun tokenizing money market fund shares on a blockchain basis, emphasizing that this work will not only contribute to maintaining asset competitiveness but also create new uses such as collateral asset utilization. This is drawing industry attention, especially as it was announced shortly after the passage of the US stablecoin legislation 'GENIUS Act' signed by President Trump.
The bill is expected to promote the expanded use of digital dollars by combining blockchain technology's speed and predictability with the traditional financial system. Consequently, the competitive landscape between money market funds and stablecoins is likely to intensify.
In an interview with Bloomberg, Ho stated that "investors can now use money market fund shares as collateral instead of cash or government bonds, while simultaneously guaranteeing interest income," analyzing this as an example demonstrating money market funds' 'flexible asset' nature.
The banking sector is closely monitoring the situation where traditional asset demand is weakening due to stablecoin's rise. In April, the Treasury Borrowing Advisory Committee (TBAC), a private advisory body to the US Treasury, warned that if stablecoins proliferate, banks might reduce government bond demand, potentially leading to credit supply contraction. This trend could directly impact money market funds investing in short-term government bonds.
Peter Crane, CEO of Crane Data, noted in an interview before the GENIUS Act's passage that while the liquidity absorption potential of the stablecoin market might be exaggerated, rapid market expansion could influence the US government bond market.
Meanwhile, Yie-Hsin Hung, CEO of State Street Global Advisors, warned at a recent conference that "if Wall Street falls behind the tokenization trend, it will lose its cash throne." The digital competition surrounding traditional assets is gradually unfolding.
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