Natively tokenized shares of a multi-manager fund managed by BNP Paribas Asset Management become available on the Allfunds platform.
BNP Paribas Asset Management (BNPP AM) has taken a significant step in the world of digital assets by issuing a natively digital share class of a money market fund (MMF) on the Allfunds blockchain. This move marks the latest development in the growing trend of tokenized funds, offering enhanced liquidity and operational efficiencies enabled by blockchain technology.
The new MMF was issued using the private permissioned Neobonds platform, which is based on Digital Asset's Canton. Notably, the sovereign bond issued by Slovenia was also part of the European Central Bank's (ECB) trial of wholesale Central Bank Digital Currencies (CBDC) on the same platform.
In a cross-border transaction with a French counterparty, the new shares of the tokenized MMF were used, demonstrating the potential for faster settlement once the ECB rolls out its wholesale DLT settlement solution. BNPP AM acted as the transfer agent and dealing services provider for the transaction, with Allfunds Blockchain serving as the technology partner.
Paul Daly, Head of Distribution Products & Solutions, Securities Services, BNP Paribas, expressed his views on the tokenization of MMFs, stating that this could broaden distribution and offer enhanced liquidity. He also hinted at the potential exploration of these tokenized MMFs for retail investors in the future.
BNPP AM's foray into tokenized MMFs aligns with its existing blockchain solution, AssetFoundry, which is based on the public Ethereum network and sits within BNP Paribas CIB. This move signifies the bank's commitment to leveraging blockchain technology to streamline fund distribution and subscription processes and support integrations with digital asset platforms.
The benefits of natively digital share classes of money market funds on blockchain platforms, such as the solution developed by BNP Paribas Asset Management and Allfunds, revolve around enhanced liquidity, real-time settlement, increased utility (including use as collateral), and operational efficiencies enabled by blockchain technology.
Tokenizing MMF shares as digital native tokens on blockchain enables increased utility, real-time settlement and transferability, operational efficiencies, fractional ownership and accessibility, and enhanced security and transparency.
As more institutional liquidity shifts to tokenized forms, traditional financial infrastructures may evolve toward more digital, interoperable, and automated systems. However, tokenized MMFs must navigate regulatory frameworks concerning custody, issuance, and investor protection, which may affect adoption speed and structuring.
With this step, BNPP AM is not only exploring the potential of tokenized money market funds for institutional investors but also for crypto-native institutions and retail investors. This move positions money market funds as effective alternatives to crypto stablecoins, potentially retaining institutional and retail investor interest.
In summary, the BNP Paribas and Allfunds blockchain-based native digital share classes of money market funds offer faster, more flexible, and secure investment products that enhance liquidity management for institutional and potentially retail investors. This move aligns with similar initiatives by global financial players leveraging blockchain to unlock new operational and financial efficiencies in money market funds.
[1] JPMorgan strategists highlight the versatility of tokenized MMF shares in the context of Goldman Sachs and BNY collaboration. [2] Regulatory challenges may affect adoption speed and structuring of tokenized MMFs. [3] Tokenized MMF shares can be used as collateral and for other financial operations without losing interest. [4] Blockchain enables instant transactions and ownership updating, reducing settlement times from days to near real-time and thereby lowering counterparty and operational risk.
- BNPP AM's collaboration with Allfunds in issuing a native digital share class of a money market fund shows promise for broader distribution and increased liquidity of tokenized MMFs, especially as JPMorgan strategists highlight their versatility in the context of Goldman Sachs and BNY's collaborative efforts.
- The adoption speed and structuring of tokenized MMFs may face regulatory challenges, as these securities need to adhere to the rules regarding custody, issuance, and investor protection.
- Capital can be effectively utilized when tokenized MMF shares are employed as collateral or for other financial operations, as they retain their interest during such processes.
- One of the key benefits of blockchain technology is its ability to facilitate instant transactions and real-time updating of ownership, significantly reducing settlement times from days to near real-time and potentially lowering counterparty and operational risk.
