Bank of America Highlights Stablecoins and Tokenization as Challenges for Money Market Funds, Not Treasury Bills
Bank of America’s rates strategy team projects that although stablecoin demand for U.S. Treasury bills may grow by $25 billion to $75 billion within the next year, this is unlikely to significantly alter the Treasury bill market’s dynamics.
The bigger impact is expected in the money market mutual fund (MMF) sector, where stablecoins—cryptocurrencies pegged to assets like the U.S. dollar or gold—pose a competitive threat due to their ability to offer higher yields. Stablecoins are widely used for payments and international money transfers.
In response, some MMF investors are increasingly adopting tokenization as a defensive tactic. For example, BNY Mellon and Goldman Sachs launched blockchain-based technology in July to track ownership of select MMF shares, marking the first instance of tokenized MMF share rollovers.
Since stablecoins are currently not allowed to pay yields, MMFs have a limited window to utilize tokenization to offer attractive rates before potential regulatory changes or other innovations reduce their competitive edge.
