Goldman Sachs and Bank of New York Mellon (BNY) have collaborated to introduce a pioneering initiative that enables institutional investors to subscribe to and redeem tokenised shares of money market funds (MMFs) using advanced blockchain technology. The integration connects BNY’s LiquidityDirect platform with Goldman Sachs’ private GS DAP blockchain, resulting in a digital mirror of MMF share ownership while retaining the foundational elements and settlement processes of traditional financial systems.
This venture marks a significant landmark in the U.S. financial landscape, allowing fund managers to facilitate subscriptions to MMFs via BNY’s LiquidityDirect and Digital Asset platforms. Noteworthy participants in this pilot launch include Goldman Sachs Asset Management, BlackRock, BNY Investments Dreyfus, Federated Hermes, and Fidelity Investments.
The tokens that have been created through GS DAP correspond to digital records of MMF shares. However, the management and settlement of the funds are still conducted within conventional frameworks by BNY Mellon. BNY remains responsible for the official record-keeping and settlement processes, while the digital tokens provide a programmable representation of ownership.
Laide Majiyagbe, BNY’s global head of liquidity, financing, and collateral, explained that the tokenisation of MMFs presents a vital step towards transitioning to a digital finance architecture. She describes this process as a secure and scalable method for merging existing financial systems with emerging blockchain innovations.
“Our collaboration with Goldman Sachs Digital Assets underscores our role as a trusted bridge between traditional finance and technology advancements, enabling clients to navigate this transformation with assurance,” Majiyagbe stated.
Mathew McDermott from Goldman Sachs noted that the GS DAP tokens could potentially serve as collateral, paving the way for smoother asset transfers in the future. Nonetheless, it should be highlighted that the pilot is currently a closed system, lacking the features seen in public decentralised finance.
While the concept of tokenised finance is in its nascent stages, initiatives like this indicate a strengthening movement within Wall Street. BNY and Goldman’s approach echoes earlier actions by BlackRock, which developed its BUIDL token, becoming a significant player in the AU$10.23 billion market for tokenised US Treasuries and cash equivalents.
The overall market for tokenised funds has been on a steady rise. Moody’s has documented an increase of US$5.7 billion (approximately AU$8.63 billion) in assets since 2021. This growth has been spurred by increasing interest from asset managers and institutional investors who are seeking low-volatility options enhanced by blockchain efficiencies.
This movement towards tokenisation not only underscores the shift towards digital assets in the financial sector but also reveals institutional acceptance of blockchain technology as a viable solution for modernising financial transactions and enhancing efficiency.
