Asset tokenisation refers to the process of issuing and recording an asset in digital form, using a database distributed within a community of users, known as distributed ledger technology (DLT). Tokenised money market funds are similar to traditional money market funds, but differ in their modus operandi. Their legal nature and return remain identical to those of a traditional money market fund. The novelty lies in the recording of fund units in the form of tokens traded on distributed ledgers rather than with a central securities depository as is the case with traditional money market funds. This allows automated operations – using computer programmes known as smart contracts – to reduce costs and speed up transactions.
In terms of market capitalisation, the securities most commonly converted into tokens, ahead of money market funds, are private debt funds (Chart 1), which are mainly invested in fintechs, real estate projects and small businesses in emerging countries. The tokenisation of money market funds holding US Treasuries is growing especially rapidly in the US market, with capitalisation of more than USD 7 billion in June 2025, compared with only USD 100 million at end-2022 (Chart 2). Moreover, the US market has witnessed an increase in the number of tokenised fund managers since 2024, although it remains relatively concentrated, as the market is mainly shared by four major tokenised money market funds. In Europe, the market remains very small at present. Although, the tokenised money market fund market accounts for around 0.1% of the traditional money market fund market, which is worth over USD 7 trillion.
The characteristics of a tokenised money market fund are comparable to those of a stablecoin in several respects: the short-term assets in which tokenised money market funds are invested are similar to the highly liquid assets that comprise stablecoin reserves, including short-term US Treasuries; just like stablecoins, tokenised money market fund units are easily transferable.
However, there are also differences between these two types of assets. Unlike stablecoins, tokenised money market funds provide a return, generally the yield on US Treasuries (4.4% for US 10-year Treasuries maturing in June 2025) through daily interest payments – or even by the second for certain funds – 365 days a year. However, tokenised money market funds may be less liquid than funds for stablecoins, depending on the type of tokenised fund, the liquidity of the assets themselves and the contractual terms and conditions.
Chart 2: Market capitalisation of tokenised money market funds invested in US Treasuries