Treasury Today on Tokenised MMFs
U.K.-based publication Treasury Today published a piece that interviews BlackRock's Head of Digital Cash Hannah Winter titled, "Tokenised money market funds: what are the use cases?" It states, "Corporate treasurers have long used money market funds (MMFs) to manage their cash. MMFs offer liquidity and security as well as a competitive yield, making them an attractive alternative to bank deposits. But in today's digital world, there's a new kid on the block. Tokenised money market funds (tMMFs) offer the benefits of traditional MMFs, while fund shares are represented as digital tokens on a blockchain. As a result, they offer additional functionality, such as the ability to transfer shares easily between investors." The piece asks, "So how do tMMFs work, which use cases do they support for corporate treasurers and which benefits do they offer compared to traditional MMFs?" Winter explains, "[I]n terms of shape and form, a tMMF is largely the same as a traditional MMF, with a similar underlying operating structure. However, the shares of the MMF have been wrapped into a token and are displayed on a blockchain. In the current market ... the underlying portfolio of securities is not tokenised." She says, "`tMMF shares are issued by the transfer agency in token form and can be held on either a private or a public blockchain. As a result, a tMMF share has features that differ from an analogue share. 'The benefit to corporate treasurers is that having the share held in token format introduces new features and new utility.'" Treasury Today tells us, "According to Winter, the market for tMMFs is 'really starting to take off.' For corporate investors, adoption is largely being driven by the need for real-time liquidity management, digital payments, improved collateral efficiencies and operational efficiencies. In the last 18 months, she says support for the stablecoin market has particularly been propelling growth in this space. 'A lot of the growth is still coming from the decentralised finance (DeFi) crypto native investor, which is helping to prove out the utility of digital cash as complementary investment product,' she adds. The current market for tMMFs includes more than US$30bn in tokenised real-world assets on-chain, with treasury funds accounting for around half of the total. 'We're seeing that expanding into more regulated money market products, and more issuers are coming to market to solve for this space,' Winter notes." The article adds, "But in the tokenised realm, it's important to note that not all funds are built equally. 'Issuers are selecting between regulated or unregulated fund structures, and between variations of native and digital twin models,' says Winter. 'It's important to understand the underlying fund structure, and the nature of the token. But there's a lot of issuance momentum coming from real demand that is starting to emerge from traditional investors.... We would say to investors that this is a trend that's here to stay, Winter concludes."
