Goldman Sachs, BNY Bring $7 Trillion Money Market to Blockchain

For all the sci-fi promises about blockchain transforming finance, the reality will be more mundane as thousands of ordinary instruments quietly move to digital ledgers. 

On Wednesday, it was money market funds. Goldman Sachs and the Bank of New York (BNY) announced they’re allowing institutional investors to buy digitized tokens that mirror shares in the funds, making a $7 trillion industry in which liquidity is a key selling point even more liquid.

The Redemption Arc

Money market funds, if you’re new here, are a type of mutual fund that invests in things that are very liquid and very short-term. That means the most liquid thing of all, cash, as well as cash equivalents like commercial paper. When these funds invest in debt, it’s highly rated and comes with a short-term maturity, like US Treasurys or repo agreements. This makes them a relatively safe place to park cash in times of volatility, but the tradeoff for low risk and ability to quickly redeem your money is lower dividends when compared with more aggressive or longer-term investments.

There has, of course, been no shortage of volatile times in recent years. The Federal Reserve hiking interest rates in 2022 and the investor games of inflation-watch and tariff-watch that have since followed drew some $2.5 trillion into money market funds, helping swell the industry to $7 trillion. Wall Street’s latest blockchain integration goes beyond simply digitizing traditional finance. The real innovation lies in creating digital tokens that mirror money market fund shares, a move that could fundamentally change how these instruments work:

• Money market shares can only be redeemed during market hours, but the digital tokens that mirror those shares can be traded around the clock, buoying already high liquidity.
• The partnership will work by allowing BNY’s clients to invest in money market funds, with the ownership of those investments being recorded on Goldman’s blockchain platform, something the investment bank said will unlock the utility of money market funds “as a form of collateral and open up more seamless transferability in the future.”

Several of the biggest funds in finance — BlackRock, Fidelity, Federated Hermes — have signed up to participate in the launch, with BNY and Goldman’s asset management units joining as well.

Token Mention: The announcement comes just days after President Trump signed a law that introduces US-regulated stablecoins. Retail giants Walmart and Amazon, as well as Wall Street titans JPMorgan, Citigroup and Bank of America, have all signaled that they’re exploring the stablecoin space, which involves digital tokens typically pegged to the US dollar that can be used for transactions. The money market fund token, by contrast, pays a yield and acts as an investment; both cases are indicative of how blockchain is increasingly going to play a role in every aspect of finance.