State Street Looks at Blockchain MMFs
An article published on the website Coinspeaker, titled, "State Street Explores Blockchain Solutions for Bonds and Money Market Funds," states, "State Street ... is exploring using blockchain technology to tokenize bonds and money market funds. The move comes as traditional financial institutions increasingly recognize the potential of blockchain to transform outdated financial systems. According to a Financial News report, citing an interview with the company's chief product officer, Donna Milrod, both projects are still in their initial stages and are expected to run through part of next year as the firm continues its push toward digital innovation. Milrod noted that financial trading firms often need to liquidate money market fund holdings to generate cash for trade margins. However, by tokenizing these funds, State Street seeks to streamline the process for users, allowing crypto tokens to be used as collateral without requiring redemption." They quote Milrod, "We're working towards building tokenized collateral that can serve as a variation or initial margin for trading. By using digitized funds, the process of posting collateral could become faster and less cumbersome." The piece continues, "The State Street executive also emphasized that tokenization is not just about operational efficiency, it can potentially create commercial value. She pointed to the 2022 liability-driven investment (LDI) crisis as an example of how tokenized collateral could have alleviated financial stress. In that situation, pension funds were forced to liquidate assets to cover margin requirements. She said tokenized money market funds could have offered a more flexible and less disruptive alternative." It adds, "The firm sees tokenized collateral as an essential step forward in improving trading processes and reducing operational costs. The financial services company is not alone in exploring blockchain's benefits for traditional finance. Other major players, such as BlackRock and JPMorgan, have also been experimenting with tokenized assets. Earlier this year, BlackRock launched a blockchain-based fund in March, which attracted approximately $240 million in investment within its first week. In July, Coinspeaker reported that the fund, dubbed BUIDL, was inching closer to hitting $500 million in locked funds. Similarly, JPMorgan has been using digitized money market funds as collateral and has even developed its own stablecoin, JPM Coin, to facilitate digital asset transactions."
