Bank of America Sees Stablecoins and Tokenization Challenging Money Market Funds More Than Treasury Bills
Bank of America’s rates strategy team reports that while stablecoin demand for U.S. Treasury bills is expected to grow moderately—between $25 billion and $75 billion over the next year—it is unlikely to significantly disrupt Treasury bill market dynamics.
Instead, the bank highlights stablecoins and the tokenization of government debt assets as greater challenges to money market mutual funds (MMFs). Stablecoins, cryptocurrencies pegged to assets like the U.S. dollar or gold, play a vital role in crypto markets by facilitating payments and cross-border transfers. Their ability to offer higher yields puts competitive pressure on MMFs.
To counter this, some MMF investors are increasingly interested in tokenization as a defensive measure. In July, BNY Mellon and Goldman Sachs launched blockchain-based solutions to track ownership of certain MMF shares, representing the first tokenized MMF share rollover.
With stablecoins currently barred from paying yields, MMFs see a narrow window to capitalize on tokenization and offer attractive rates before regulatory shifts or alternative methods reduce their advantage.
