The Bank of New York Mellon (BNY) is collaborating with Goldman Sachs to tokenize money market funds (MMFs), using blockchain as the record of ownership. The solution involves subscribing to MMF shares via BNY’s LiquidityDirect. These are tokenized via BNY’s Digital Assets platform, with mirrored tokens on the Goldman Sachs GS DAP blockchain.
The organizations involved in the launch include BlackRock, BNY Investments Dreyfus, Federated Hermes, Fidelity Investments, and Goldman Sachs Asset Management. Initially the functionality sounds quite basic – subscription and redemption – but the future goal is collateral mobility. Tokenization enables the instant transfer of MMFs that can be used as collateral for margin and other use cases. To date, most tokenized money market funds have targeted the crypto community, whereas this solution has an institutional focus.
“As the financial system transitions toward a more digital, real-time architecture, BNY is committed to enabling scalable and secure solutions that shape the future of finance,” said Laide Majiyagbe, Global Head of Liquidity, Financing and Collateral at BNY. “Mirrored tokenization of MMF shares is a first step in this transition.” BNY will continue to keep the official books and records for the funds.
“Using tokens representing the value of shares of Money Market Funds on GS DAP® would enable us to unlock their utility as a form of collateral and open up more seamless transferability in the future,” said Mathew McDermott, Global Head of Digital Assets at Goldman Sachs. BNY said that the private permissioned GS DAP is the platform for Phase One. The implication is that a permissionless blockchain might be used in future phases. That could be one of the high profile crypto permissionless networks or something else.
GS DAP uses Digital Asset’s Canton blockchain technology, and there’s also the more open Canton Network where Goldman participates in governance. While Digital Asset positions the Canton Network as permissionless, arguably it’s on the path to decentralization with several corporates operating nodes. This is a logical middle ground for institutional use cases, with the Canton Network further decentralizing over time. Meanwhile, there are numerous institutional tokenized collateral projects in progress, including from Digital Asset, the DTCC, ICE and the CME.
