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Tokenization’s Breakout Asset Class: Tokenized Money Market Funds
In today’s “Crypto for Advisors” newsletter, Harvey Li from Tokenization Insights takes us through tokenization trends, money market funds, and institutional adoption as we head into 2026.
Then, in “Ask an Expert,” Michael Sena looks at what it means for investors with BlackRock’s announced plans to tokenize everything from exchange-traded funds (ETFs) to real estate.
Tokenization’s Breakout Asset Class: Tokenized Money Market Funds
Tokenization entered a new phase in 2025. What started as an experiment is now becoming a functional part of institutional infrastructure, led by banks and asset managers who aren’t waiting for a tokenized future — they’re building it.
One specific product category has emerged as the clear front-runner: tokenized money market funds (MMFs). Tokenized MMFs are quickly becoming the core on-chain liquidity instrument for institutions, treasurers, and sophisticated funds. They bridge traditional short-term U.S. Treasury exposure with digital settlement, programmable workflows, and real-time portability.
Growth is real:
- Assets under management (AUM) grew from $4 billion at the start of 2025 to $8.6 billion by November, up 110% (RWA.xyz)
- Tokenized MMFs now represent ~3% of the stablecoin market compared to 2% at the start of the year
And institutions are incorporating tokenized MMF into businesses:
- JPMorgan went live with intraday repo capabilities using tokenized collateral powered by HQLAx and Ownera
- BlackRock’s tokenized money market fund is being accepted by both OKX and Binance as eligible collateral
- Lloyds Banking Group and Aberdeen Investments completed FX derivative trades using a tokenized money market fund
Momentum is building, but the real story is what comes next in 2026.
What’s driving the acceleration? Key 2026 catalysts
1. Regulatory validation and collateral eligibility
The Commodity Futures Trading Commission’s (CFTC)Global Markets Advisory Committee recommended tokenized MMFs as eligible collateral, and Acting Chair Caroline Pham launched a dedicated initiative in late 2025 to advance tokenized collateral adoption.
If tokenized MMFs become approved as eligible margin collateral, recognized for cleared derivatives, swaps, and repo and embedded into CCP and FCM rulebooks, then tokenized MMFs evolve from a cash-parking tool into core institutional collateral, the same category that fuels trillions in daily financing today.
This is a major unlock for banks, brokers, hedge funds, and trading venues that need intraday settlement and programmable liquidity.
2. The “institutional legitimacy” moment
Seventy institutions, including State Street, Fnality, Franklin Templeton, and UBS, contributed to Global Digital Finance’s November 2025 report and demonstrated that tokenized MMFs can be:
- Moved and pledged in real time across multiple ledgers
- Supported under existing regulatory frameworks
- Legally enforceable and operationally sound
3. The rise of tokenized cash rails at major banks
Until recently, tokenized MMFs could only be redeemed via traditional banking rails or stablecoins. That is changing quickly.
In 2025, we saw:
- JPMorgan tokenized deposit and deposit tokens on private and public chains
- Citi Token Services expanded U.S.D and EUR tokenized deposits and 24/7 treasury flows
- HSBC and DBS are activating tokenized deposit infrastructure in Asia and Europe
As tokenized cash rails mature, institutions will be able to move tokenized MMF to tokenized deposit and settlement cash within the same ecosystem, with no friction and no conversion back to legacy payment rails or stablecoins.
That is the moment when tokenized MMFs stop being a crypto-adjacent product and become digital liquidity management blocks for institutions.
4. Regulatory momentum for U.S.D and EUR stablecoins
While tokenized institutional cash rails are rapidly expanding, stablecoin policy and legislation are helping stablecoins become the default cash rail for public permissionless space:
- In the U.S., GENIUS Act legislation and related frameworks are pushing U.S.D stablecoins into a defined supervisory perimeter
- In the EU, MiCA delivers a full regulatory regime for e-money tokens and asset-referenced tokens
Once these frameworks settle and SMEs become more comfortable with leveraging stablecoins for cash purposes, tokenized money market funds naturally become the yield, collateral, treasury, and portfolio cash solution.
The bottom line
The direction of travel is clear. Cash that used to sit in bank accounts or legacy MMF portals is now being re-packaged into programmable instruments that plug directly into digital asset rails, and tokenized money market funds are becoming the cash management and collateral solution for all tokenized cash forms: tokenized bank deposits, deposit tokens and stablecoins.
2025 was the breakout year for tokenized money market funds as an asset class.2026 looks to be the acceleration phase, when tokenized MMFs become a standard treasury, settlement, and collateral asset for institutions.
– Harvey Li, founder, Tokenization Insight
Ask an Expert
Q: Traditionally, U.S. ETFs follow Wall Street’s market hours and settle through their clearing houses. What are the benefits and hurdles BlackRock’s investors will face in terms of round-the-clock trading?
A: 24/7 trading will change everything from staffing to risk management. When markets never close, it changes the way you need to operate. The benefits of real-time markets means that those who can react first will be able to capture the bulk of moves in asset prices.
Q: The tokenized asset market is still insignificant compared to the trillion-dollar U.S. ETF industry. How will BlackRock’s participation contribute to the tokenization ecosystem?
A: BlackRock’s massive asset portfolio will instantly increase the overall value represented by the tokenized ecosystem. More than that, it brings credibility to all types of blockchain-based assets beyond just Bitcoin and Ethereum.
Q: BlackRock’s CEO, Larry Fink, has been bullish on asset tokenization and wants to tokenize almost every traditional asset. Is tokenization a move to extend better services to investors or maintain its hegemony as the largest asset manager?
A: BlackRock clearly sees the future of tokenized assets and all the benefits they bring: reduced operational overhead, increased efficiency, and more trust. Most of a large asset manager’s business isn’t in front-facing markets, but is in clearing, settlement, and other types of back and middle office operations. Blockchain streamlines those processes and enables someone like BlackRock to increase their profit margin
– Michael Sena, chief marketing officer, Recall Labs
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