BIS warns of risks as tokenized money market funds hit $9B
Tokenized money market funds have expanded to nearly $9 billion in assets, up from about $770 million at the end of 2023, according to a new bulletin from the Bank for International Settlements (BIS). The BIS cautioned that as these on-chain Treasury portfolios gain traction as collateral within the crypto market, their growth introduces operational, liquidity, and contagion risks.
These products are tokenized versions of traditional money market portfolios, giving on-chain access to short-dated, interest-bearing instruments such as U.S. Treasurys. While they offer stablecoin-like flexibility, the BIS noted they rely on permissioned wallets, off-chain infrastructure, and concentrated ownership—factors that could intensify stress if redemptions surge or on-chain liquidity diminishes.
The bulletin highlighted a structural mismatch: token transfers settle instantly on public blockchains, whereas the underlying portfolio transactions, pricing, and settlement occur in conventional markets. During periods of elevated withdrawals, this disparity could complicate redemptions and potentially add to market volatility.
Interconnections with stablecoins present further risk, the BIS said, as some tokenized money market funds facilitate rapid conversions into stablecoins or are used in leveraged strategies. These linkages may accelerate the transmission of market stress relative to traditional money market funds.
The analysis was published a day after the BIS named International Monetary Fund official and central bank digital currency advocate Tommaso Mancini-Griffoli as the next head of its Innovation Hub.
Asset managers expand tokenized fund offerings
Major asset managers are extending tokenized money market fund initiatives across multiple blockchain networks. On Nov. 12, Franklin Templeton announced that its Benji tokenization platform integrated with the Canton Network, enabling tokenized assets— including its on-chain U.S. government money market fund—within a network tailored for financial institutions.
BlackRock also recently expanded its tokenized money market product, the USD Institutional Digital Liquidity Fund (BUIDL), to Aptos, Arbitrum, Avalanche, Optimism, and Polygon, adding to its presence beyond Ethereum.
Data from RWA.xyz indicates that BlackRock’s BUIDL currently leads the on-chain money market segment with more than $2.5 billion in tokenized assets. Franklin Templeton’s BENJI fund holds over $844 million in tokenized U.S. government securities, according to the same source.
Stay informed, read the latest news right now!
Disclaimer
The content on TrustsCrypto.com is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency markets are highly volatile, always do your own research before making decisions.
Some content may be assisted by AI and reviewed by our editorial team, but accuracy is not guaranteed. TrustsCrypto.com is not responsible for any losses resulting from the use of information provided.
