Why tokenized money market funds are a revolution and why they could threaten banks
🧵 To unfold
You've probably caught a glimpse of it in recent months; there's been a lot of talk about stablecoins.
But in my opinion, they are just a first step towards something much deeper.
More and more players are exploring a new financial instrument: the tokenized money fund, which is a fund invested in US Treasury bills... but transposable on a blockchain.
Result: a liquid, secure asset that is instantly transferable and yields returns.
Unlike traditional stablecoins, which generally do not generate returns for their holders, these tokens are backed by income-generating assets.
The average yield on money market funds is around 4%, compared to less than 0.6% for a traditional savings account in the United States.
The largest fund of this type, BUIDL, launched by @BlackRock, has already surpassed 2.4 billion dollars.
And Larry Fink, its CEO, does not hide it: "One day, tokenized funds will be as familiar to investors as ETFs."
In Europe, players are already well established, such as the French @Spiko_finance, who offer products backed by US Treasury bonds or European sovereign bonds.
The real issue?
These products could also serve as means of payment, just like stablecoins.
And this dual function (payment + yield) could disrupt the current balance of the banking system.
According to @ababankers, if individuals transfer only 10% of their $19 trillion in deposits to these new instruments, the average funding cost for banks would rise from 2.03% to 2.27%.
A modest increase, but one that could cut into a significant part of their margins!
For banks, the risk is therefore not (yet) a massive outflow of deposits
But a slow erosion of their economic model, even as stablecoins continue to grow.
You can monitor all this data through the tokenization dashboard of @TheBigWhale_ and enjoy the content developed by our research (articles, surveys, briefings, reports)
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