BNY Mellon and Goldman Sachs Move to Tokenize Money Market Funds

Wall Street embraces blockchain as traditional finance takes its first serious steps into digital assets.

The worlds of traditional finance (TradFi) and decentralized technologies are beginning to converge in meaningful ways. In one of the most significant institutional moves to date, BNY Mellon and Goldman Sachs have announced initiatives to tokenize money market funds—a $6 trillion cornerstone of global liquidity management.

Tokenization refers to the process of issuing digital tokens on a blockchain that represent ownership of real-world assets. By tokenizing money market fund shares, these financial giants aim to unlock faster settlements, round-the-clock liquidity, and programmable finance — without disrupting regulatory oversight or investor protections.

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Why Money Market Funds?

Money market funds (MMFs) are highly liquid mutual funds that invest in short-term debt instruments such as Treasury bills, certificates of deposit, and commercial paper. Institutional investors rely on them as safe, stable, yield-generating instruments for treasury and cash management.

However, despite their importance, MMFs suffer from the same limitations as other TradFi instruments: delayed settlement times (often T+1 or longer), restricted trading hours, and friction when moving liquidity across custodians or platforms.

Transfer fund ownership near-instantly 24/7
Use tokenized MMFs as collateral in real-time on-chain finance
Improve cash efficiency and reduce operational complexity

BNY Mellon’s Digital Asset Strategy

BNY Mellon—the oldest bank in the United States and the world’s largest custodian bank with over $45 trillion in assets under custody—has steadily built out its digital asset capabilities in recent years.

Its strategy includes:

Developing a digital asset custody platform for cryptocurrencies and tokenized securities
Investing in blockchain infrastructure and interoperability protocols
Collaborating with fintech startups to integrate tokenized fund infrastructure into its existing rails

By integrating tokenized MMFs into its custody and treasury services, BNY Mellon enables clients to manage both traditional and blockchain-based assets in one interface — a critical step toward institutional adoption.

Goldman Sachs and Tokenized Financial Products

Goldman Sachs, long known for its innovative financial engineering, has also been advancing its blockchain initiatives through its Digital Assets Platform and GS DAP (Digital Asset Platform).

The bank has already piloted tokenized bonds and repo agreements on permissioned blockchains. Tokenizing money market funds aligns with its goal of digitizing the full trade lifecycle:

Issuance
Trading
Settlement
Custody

Goldman has emphasized its preference for private and permissioned networks (vs. public blockchains), focusing on compliance, identity, and integration with capital markets infrastructure. Still, the underlying benefits — near-instant settlement, smart contract automation, and data transparency — remain transformative.

How Tokenization Works

Creating a digital token on a blockchain that represents a share of the MMF
Maintaining a 1:1 backing between the token and the actual fund share
Using smart contracts to manage issuance, redemption, compliance, and reporting

Tokens can be issued on permissioned blockchains or hybrid chains that preserve institutional controls while gaining some of the openness and interoperability of public chains. Investors could move tokens between wallets, use them as collateral in decentralized applications, or integrate them into algorithmic treasury management systems.

Benefits for Institutions and Markets

Tokenized MMFs provide several advantages for institutional investors, fund managers, and the financial system at large:

24/7 Liquidity: Tokenized shares can be transferred any time, not just during market hours.
Faster Settlement: Instant or same-day clearing, reducing counterparty and settlement risk.
Transparency: Blockchain-based ownership and activity records reduce the need for intermediaries.
Composability: Tokenized funds can be used in automated workflows, lending protocols, and treasury platforms.

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Regulatory Considerations

Both Goldman Sachs and BNY Mellon are taking a cautious and compliant approach. Money market funds are regulated under the Investment Company Act of 1940 in the U.S., and any tokenized implementation must preserve KYC/AML, reporting, and liquidity requirements.

This is why these projects are mostly launching on private, permissioned blockchains initially — to ensure regulatory compliance and enterprise-grade access controls.

Still, many believe the long-term future involves interoperability between permissioned and public networks — enabling liquidity and access without sacrificing compliance.

The Bigger Picture: Institutional Tokenization

The tokenization of MMFs is part of a broader trend in finance. Banks and asset managers are exploring how to digitize everything from bonds and equities to real estate, private credit, and even carbon credits.

According to Boston Consulting Group, the tokenized asset market could grow to $16 trillion by 2030. Key drivers include:

Rising institutional interest in blockchain efficiency
Demand for better collateral management in volatile markets
Growth of digital-native financial services
Regulatory clarity around digital securities

Conclusion: Wall Street’s Blockchain Moment

BNY Mellon and Goldman Sachs are not just experimenting — they’re laying the groundwork for the next evolution of financial markets. Tokenizing money market funds is an early but crucial step in reengineering how assets move, settle, and interact in a global, real-time economy.

As these institutions integrate blockchain into their core systems, expect a ripple effect across finance. Tokenized funds, bonds, and treasuries could soon become not just experimental pilots, but standard offerings in a digital-first financial world.

The walls between TradFi and DeFi are beginning to dissolve — and tokenized MMFs may be the first bridge.