A blog posting from Circle Internet, titled, "Real-Time Collateral with Tokenized Money Market Funds Has Arrived," tells us, "Financial markets have evolved. The infrastructure supporting them -- built for an age of limited banking hours and multi-day settlement -- has struggled to keep pace. This is especially evident in the world of collateral and liquidity management, where demand for 24/7/365 markets runs headfirst into the limitations of legacy financial infrastructure. That's a problem. Delayed settlements, overnight liquidity buffers, credit risk, manual processing, and opaque-risk exposures pose challenges to capital efficiency and resiliency -- especially during periods of volatility. As the issuer of USYC, a tokenized money market fund with onchain settlement, and USDC, the world's largest regulated stablecoin, we see these challenges firsthand. Thankfully, we also see a path forward." (Note: We'll be featuring a session on "Tokenized Money Funds & Tech Issues" at our European Money Fund Symposium, which will be held Sept. 22-23, 2025 in Dublin, Ireland.)
It explains, "In traditional capital markets, collateral flows and margin processes are slowed by operational bottlenecks. They're also restricted to banking hours. That can cause delays, which in turn can lead to: Needing excess capital buffers to cover overnight and weekend risk An inefficient deployment of capital, reducing trading velocity; An inability to respond to volatility outside of market hours; and, Slow and unreliable margin movement. As markets shift toward continuous operation, these inefficiencies become more pronounced. USYC -- a tokenized money market fund that enables nearly instant, around-the-clock redemptions into USDC -- offers a solution."
Circle says, "Tokenized money market funds like USYC offer a breakthrough in collateral management. By leveraging blockchain infrastructure, these assets can be: Transferred nearly instantly, 24/7/365; Called and liquidated with higher frequency; Integrated directly into smart contracts, automating margin and risk workflows; and, Verified and settled onchain, reducing reconciliation overhead; and, Continuously generating yield. This model is ahead of traditional financial systems in terms of agility and capital efficiency, and USYC delivers this vision in a regulated package."
They state, "And when USYC is paired with USDC, it seamlessly combines the yield of a tokenized money market fund with the liquidity of a stablecoin -- all within Circle's infrastructure. It's a powerful combination of flexibility and efficiency. With this one-two punch, USYC resolves a long-standing dilemma: liquidity has typically come at the expense of yield, requiring firms to hold large, non-productive cash buffers. However, tokenized money market funds like USYC help firms keep capital productive up until the moment it's needed -- redeeming, transferring, or rehypothecating assets in real time. Blockchain technology, which underpins USYC, is unique in its ability to bring these at-scale efficiencies to capital markets. USYC raises the bar even further, making near-instant redemptions for yield-bearing collateral the new table stakes for the financial industry."
Finally, they write, "The convergence of tokenized money market funds and stablecoins unlocks tangible benefits for institutions. It powers reduced collateral drag, faster risk response, and improved liquidity access. With tokenized money market funds and stablecoins: Capital can earn yield until the moment it's needed; On-chain settlement all but eliminates clearing risk; Smart contracts enable conditional logic for margin calls, liquidation triggers, and collateral top-ups; Margin calls can be met nearly instantly, even outside of business hours; and, Firms can mobilize assets across geographies and platforms without friction. Taken together, these onchain pillars can help to drive a more efficient, resilient, and inclusive financial system -- one that meets the demands of a global economy that never sleeps."
A footnote says, "USYC is a digital asset token. Each USYC token serves as a digital representation of a share of the Hashnote International Short Duration Fund Ltd., a Cayman Islands registered mutual fund. The Fund has appointed Circle International Bermuda Limited ('CIBL'), a Bermuda Monetary Authority licensed digital asset business, as its token administrator, responsible for the management of USYC on behalf of the Fund. Shares of the Fund and USYC are only available to non-U.S. Persons."
In related news, BNP Paribas posted an article titled, "Tokenisation of Money Market Funds (MMFs) – a new landmark for digital securities?" It tells us, "In this interview with Asset Servicing Times, Stefan Brinaru, Head of Digital Assets at BNP Paribas Asset Management, and Carole Michel, Senior Global Product Manager – Fund Distribution, Securities Services, at BNP Paribas, take a look at tokenised money market fund shares." Brinaru explains, "Tokenisation is simply the latest stage in the digitisation of securities. The tokens are held and traded through a digital ledger or blockchain -- with all the security and efficiency that that implies. In theory, any securities can be tokenised. In practice, in the financial industry, most of the focus to date has been on the tokenisation of private assets and money market funds (MMFs). However, the cash leg currently remains off-chain. And for tokenised securities, including tokenised MMFs, to thrive in the long term, there needs to be cash directly on the digital ledgers."
Michel comments, "From a general point of view, beyond our MMF tokenisation initiative, for the investor, the main advantage of tokenisation is the potential for lower transaction costs. We notably see that benefit in France, where direct investors are recorded in the fund's register, meaning they can deal directly with the digital ledger technology (DLT) Transfer Agent without appointing or going through other intermediaries -- who may usually feature in the traditional value chain.... Tokenised funds also recognise the needs and expectations of the new generation of investors who use their wallets to trade markets on a 24/7 basis."
She continues, "There are also clear advantages for the manager of the MMF. The tokenised shares represent a new distribution channel that can reach both individuals and institutions. Notably, the fact that all transactions through the digital ledger could be settled instantly in the future, reducing the settlement cycle -- on an atomic cash versus delivery basis to reduce the counterparty risk. The information about flows into or out of the MMF would also be available instantly, and around the clock, as transactions occur."
Brinaru also tells us, "The tokenisation of MMF shares is the latest step in a journey that began some years ago. BNP has been looking at opportunities from blockchain since 2018-2019. In 2022, BNP Paribas Corporate and Institutional Banking (CIB) issued a tokenised bond through AssetFoundry, one of its tokenisation platforms. Specifically on tokenised funds, BNP Paribas Asset Management and the BNP Paribas’ Securities Services business have been working together on them for the last year."
Michel then states, "To date, they are really a phenomenon in Europe, or rather parts of Europe. This is thanks to innovative regulations. Among much else, in France, the regulatory framework -- notably an ordinance of 2017 and a decree of 2018 -- allows for the registration of financial securities in a distributed ledger and specifies the characteristics of the distributed ledger technology used for their registration."
She adds, "Luxembourg is another country where the regulations have been updated to take account of digital securities. As you noted, our new tokenised MMF shares involve parties in both countries. In other parts of the world, we are monitoring changes in regulations to cater for digital securities and digital assets, especially in Asia Pacific."
Finally, Brinaru adds, "We are still very much on a learning curve. The benefits and risks of tokenised funds will become clearer over the next year or so. Nevertheless, the launch of our tokenised MMF is a major landmark. Currently, the tokenised MMF's share was only available for one investor, a French BNP Paribas Asset Management fund. In the coming future, we may move from experimentation and proofs of concept to a real product for investors and asset managers. We expect that there will be a lot more progress with tokenised MMFs in the coming months." (See also Crane Data's May 27 Link of the Day, "BNP Paribas AM Debuts Tokenised MMF.")
