Bank of America Reports Stablecoins and Tokenization Impacting Money Market Funds
Bank of America's rates strategy team highlights two key influences on the U.S. Treasury market: stablecoin demand for T-bills and the tokenization of government debt-related assets.
- Stablecoins may not significantly impact Treasuries compared to money market mutual funds (MMFs), where they pose a competitive challenge due to higher yields.
- Stablecoin demand for Treasury bills is expected to increase by $25 billion to $75 billion over the next 12 months, but this will not markedly change market dynamics.
- Some MMF clients are interested in tokenization as a defense against stablecoins.
- In July, BNY Mellon and Goldman Sachs launched blockchain technology to track ownership of select MMF shares, marking the first tokenization of MMF shares.
- Current restrictions on stablecoins paying yield provide MMFs a brief opportunity to tokenize and offer competitive rates before regulatory changes diminish that advantage.