Goldman Sachs (GS) and the Bank of New York Mellon (BK) are teaming up to make it easier for institutional investors to trade money market funds 24/7 by using blockchain technology to “tokenize” the assets.
The collaboration between the Wall Street investment giant and a 241-year-old bank founded by Alexander Hamilton is the latest example of how venerable financial firms are pushing further into the digital asset realm as the crypto industry gains more favorable regulatory treatment in Washington, D.C.
Goldman Sachs and Bank of New York Mellon will use a proprietary tokenization platform developed by Goldman to maintain the record-keeping of select Bank of New York Mellon money market funds.
Money managers BlackRock (BLK), Federated Hermes, and Fidelity Investments have also signed up for the launch.
Proponents see the value of putting money markets on blockchains as coming down to raw efficiency, where time and, therefore, costs of transferring interest-bearing cash instruments could be reduced. In that way, they serve the same purpose as interest-bearing, dollar-pegged stablecoins.
A big use for these assets within the crypto world is via cryptocurrency exchanges that accept shares of tokenized money market funds as collateral for loans.
“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,” Laide Majiyagbe, BNY’s global head of liquidity, financing, and collateral, said in a statement with the press release.
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Majiyagbe called the effort with Goldman Sachs “a first step.” The company will not solely rely on a blockchain for record-keeping. Instead, BNY will still maintain the official books, records, and settlement for the funds within the current guidelines for money market funds.
The attention for Goldman’s tokenization platform, known as GS DAP, comes roughly half a year after the Wall Street bank announced its intent to potentially spin it out as a “an industry-owned distributed technology solution.”
That ambition is “still in progress,” according to a Goldman Sachs spokesperson.
“We are excited about this strategic collaboration with BNY in our journey towards the longer-term vision,” Goldman Sachs head of digital assets Mathew McDermott said of the tokenization platform in a statement with the press release.
As of now, there are more than 40 tokenized money market funds, though most of them have less than $1 billion in assets, according to JPMorgan Asset Management’s Teresa Ho Kim. BlackRock’s $2.4 billion BUIDL fund represents roughly half of the nearly $5 billion market.
