Tokenized yield funds, stablecoins a ‘powerful’ combo

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Given yesterday’s stablecoin bill progress and BlackRock’s tokenized money market fund hitting $1 billion AUM, I thought it’d be a good time to highlight the expected growth of these segments in tandem.

The asset milestone for BlackRock’s BUIDL — a fund investing in cash, US Treasury bills and repurchase agreements — comes a week before its first birthday. The tokenized treasury category (with other contributors like Ondo, Hashnote and Franklin Templeton) has grown to roughly $4.4 billion.

BlackRock’s Robbie Mitchnick told me during Wednesday’s Blockworks roundtable that a majority of those using BUIDL are crypto-native. 

They’re firms, for example, seeing the value prop in generating yield on holding cash balances in an efficient yield-generating way. Perhaps shuffling capital between countries or making quick global payments. And then getting liquidity faster via stablecoin exit ramps.

Waqar Chaudry, Standard Chartered’s head of digital assets, financing and securities services, pointed to some industry watchers initially believing tokenized money market funds could replace stablecoins. 

Many might prefer tokenized funds for collateral management, Chaudry added. But they’ll co-exist with stablecoins, as he’s seeing money market funds being subscribed and redeemed via stablecoins on a 24/7 basis.

“I’m not saying it’s 50/50 or 80/20,” he said of the stablecoin/tokenized MMF mix. “We’ll see how it develops over the next few years, but they’re definitely complementary.”

Michnick agreed, noting he sees tokenized money market funds as the predominant cash savings vehicle. Stablecoins, meanwhile, “will retain their dominance” as the instrument for payment and transaction.

“Both are a little bit better than the other at those respective use cases, as long as you keep the frictions down to an extremely low or near-zero level to be able to move between them,” Mitchnick said. “Then you can use them in duality in a really powerful way.”

While tokenized treasurys are gaining steam, stablecoins are a much larger segment — sporting a roughly $220 billion market cap.

US lawmakers see the value of stablecoins. Casey yesterday detailed how a bill aiming to establish regulatory guidelines for stablecoin issuers advanced to the Senate floor.

But Mitchnick noted: “What we haven’t seen happen to date in really any arena of tokenization is broad-based uptake from investors and holders who have always lived in the traditional assets base and on those rails.”

That speaks to the potential growth for BUIDL in the years ahead as the TAM expands.

Tokenized bonds’ story is “still not gelling well in terms of commercial viability,” Chaudry said.

As for why there’s likely to be “limited traction” for tokenized equities, Chaudry added, those markets are pretty efficient already. Then there are efforts to tokenize more illiquid asset classes (i.e., real estate and private equity).

Execs from BNY, Ondo Finance, Securitize (the firm that worked with BlackRock on BUIDL), and Nomyx will join me on a Blockworks Digital Asset Summit panel called “Tokenization: Rebooting the Global Financial System” to chat more about this.

See you there?

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