Goldman Sachs and BNY Launch First U.S. Tokenized Money Market Funds

Two of Wall Street’s biggest names just made history. Goldman Sachs and Bank of New York Mellon announced a new way for big investors to buy money market funds using blockchain technology. This marks the first time U.S. fund managers have offered this service.

Major companies like BlackRock, Fidelity, and Federated Hermes have already signed up to use this new system.

The setup is simpler than it sounds. Investors use BNY’s LiquidityDirect platform to buy and sell money market fund shares. When they do this, Goldman Sachs creates digital “mirror” tokens on their blockchain system called GS DAP.

BNY keeps running the funds the same way they always have. The tokens just create a digital record that matches the real shares. This lets investors move money around faster and use their funds as collateral for trades.

“We created the ability for our clients to invest in tokenized money market share classes across multiple fund companies,” said Laide Majiyagbe, BNY’s global head of liquidity. The new system removes friction that happens in traditional markets.

Money market funds hold $7.1 trillion in assets. These funds are where companies and big investors park their cash to earn a small return while keeping money safe. Right now, it can take up to two business days to get money out of these funds.

The new blockchain system changes that. Trades can happen instantly, 24 hours a day. More importantly, investors won’t need to sell their fund shares to use the money as collateral. They can just transfer the digital tokens instead.

“Instead of investors selling money market funds to deliver cash collateral for a trade, they could just exchange the token,” explained Mathew McDermott, Goldman’s global head of digital assets. This could free up billions of dollars that get tied up in traditional transactions.

This launch happened because of new laws. President Trump signed the GENIUS Act on July 18, creating the first federal rules for stablecoins. The law requires companies to back their digital coins with real dollars or Treasury bills.

The new rules give banks and other financial companies a clear path to issue their own digital currencies. This cleared the way for projects like the Goldman-BNY partnership.

“This could be the greatest revolution in financial technology since the birth of the Internet,” Trump said when signing the law. The timing wasn’t accidental – Goldman and BNY had been waiting for this regulatory clarity.

Goldman and BNY aren’t the only ones jumping into tokenized funds. The competition is getting intense:

BlackRock’s BUIDL fund now holds $1.7 billion and works on seven different blockchains. Franklin Templeton started the first tokenized money market fund back in 2021 and has gathered $689 million.

Fidelity filed to create their own blockchain-based fund earlier this year. JPMorgan has been running their Tokenized Collateral Network since 2023, processing over $300 billion in transactions.

The whole tokenized Treasury market has grown almost 500% in the past year, reaching $4.77 billion in total value. McKinsey thinks the entire tokenized asset market could hit $2 trillion by 2030.

This is just the start. Goldman plans to eventually spin off their GS DAP platform to become industry-owned. They want to create a system where different financial companies can work together seamlessly.

The benefits go beyond just speed. Tokenized funds could work better with new financial technology. They might connect to decentralized finance platforms or enable new types of automated trading.

But challenges remain. Some tokenized funds still can’t serve U.S. investors due to unclear regulations. Critics worry that moving too fast could create new risks for investors.

The European Union is setting clearer rules through their MiCA regulation. U.S. authorities are still working out the details.