Wall Street's $7.1 Trillion Money Fund Industry Is Going On-Chain, Collateral First

• Tokenized US Treasuries have grown from roughly $1.7 billion to more than $16 billion, and are now accepted as posted collateral.
• BlackRock (BLK) , JPMorgan (JPM) , BNY (BNY) , Goldman Sachs (GS) and the DTCC have all moved on tokenized cash inside the same window.

BlackRock has tapped JPMorgan to tokenize shares of its $311 billion European cash range on JPMorgan's Kinexys platform. That figure is the size of the fund range, not the amount going on-chain on day one. Cash management is where treasurers park money they cannot afford to lose.

"I think what we've asked a lot of like institutional finance people who sit in their traditional roles and have very fixed practices is to say, you must change fundamentally what you do to get exposure to something that is just a fraction of the size of what you have. That doesn't make any sense whatsoever," Nic Roberts-Huntley, co-founder and CEO of Blueprint Finance, said on the On The Margin podcast.

JPMorgan's asset management arm launched its first tokenized money market fund, then in May a second on Ethereum with $100 million of its own money. The US money market fund industry is worth about $7.9 trillion.

Why collateral is the honest metric

Accepting an asset as collateral forces an institution to underwrite it as something it would seize and sell if a counterparty defaulted.

"all capital markets, all traded assets need to run on credit. That's how we get to seven trillion in FX. It's not everyone just pre-funding each other and trading," Nirup Ramalingam, CEO of BridgePort, said on the On The Margin podcast. His company exists because roughly $60 billion sits trapped in pre-funded crypto trading accounts. "if you're pre-funding and you're not trading, that's not efficient, obviously. So you want to optimize your capital by allocating on an exchange or multiple exchanges in milliseconds as the opportunities arise," he said.

"A venue processing $34.3 trillion across 449 assets isn't a trading platform anymore; it's a settlement layer," said Binance Interim Chief Marketing Officer Eowyn Chen in an interview.

The money is already sitting there

"The thousand largest have over, I think it's three trillion dollars of cash and investments on their balance sheets. So there's a lot of money," Tyler Traudt, founder and CEO of DebtBook, said on the On The Margin podcast.

A tokenized money market fund lets a treasurer hold yield while the same instrument moves as collateral. "who wants to wait for however many days that takes and go through however many hoops it takes to re-onramp to all these other platforms when you could just immediately use those funds to do the things you're already doing," said Steven Schwartz, co-founder and CEO of Whop, on the podcast.

Security is the counterweight, and it scales with the stakes. "People are stealing money and it's a real problem. And it's an even greater problem if you've got vulnerable systems," Traudt said.

Binance and the retail rails

"Volume at that scale changes what you can build on top of it … deeper liquidity means tighter spreads, tighter spreads make payments and collateral viable, and suddenly the core functions of a bank are running on rails that never close," Chen said.

"10 years ago, it was just better user experience and no fees, that was the main value proposition. This time, the underlying rails are changing, the underlying rails are becoming stablecoins. Banking is becoming a stablecoin," said Pavel Matveev, co-founder and co-CEO of Wirex, on the podcast.

Gemini (GEMI) runs its card program at a loss on purpose, according to Artemis researcher Patrick Kim. "They're actually continuing to invest and continuing to go all in on their cards program because even though they're losing money on the card specifically, it drives so many new users and so much user attention onto the platform that they make a lot more money on their other revenue segments," Kim said on the podcast. He expects the category to lead: "I think cards will likely be the number one retail payment use case for stable coins by the end of this year," Kim said.

It is the same pattern behind the deposits leaving community banks for stablecoins. "the average consumer doesn't actually care about crypto as little as the crypto community wants to admit. They want their money fast and they want their money cheap," Schwartz said.

The rulebook decides the pace

"we know the next wave of capital that's going to come from TradFi asset managers and hedge funds will not pre-fund. And in fact some in the US cannot pre-fund because of regulations," Ramalingam said. The CFTC issued tokenized collateral guidance in December and has amendments to its collateral and margin rules on the agenda. The DTCC is building a real-time tokenized collateral platform for a fourth-quarter launch, and Broadridge (BR) is live with on-chain governance for tokenized equities.

"The last time we had a new financial rail was probably credit cards in the 70s. And so it's probably the most exciting time in many of our, if not most of our careers to be building in either FinTech or crypto," said Nitya Subramanian, founder and CEO of Para, on the podcast.

Ramalingam describes his own company as the wiring between the two worlds. "Bridgeport is the plaid for crypto. … Plaid is that middleware that's connecting FinTech payment providers to bank accounts. Bridgeport is that middleware that's connecting exchanges to custodians," he said.

Where the money goes

• BlackRock (BLK) : cash range on-chain, and past pure crypto exposure.
• JPMorgan (JPM) : Kinexys rails, plus two tokenized money funds.
• BNY (BNY) , Goldman Sachs (GS) : the tie-up to make fund shares postable.
• Broadridge (BR) : proxy and corporate actions, tokenized.
• Binance: private, but the coin (BNBUSD) is public

Vishal Garg, founder and CEO of Better Home & Finance (BETR) , put the destination plainly. "We think this is going to be the way that. Digital assets make their way into the banking system," he said on the podcast. He frames the collateral case as a homeowner's frustration: "It was like, wait, I'm gonna have to sell all this stuff. That and pay capital gains on it. And then take the cash. To put it in the house. Why can't I just pledge the stuff. Instead of cash?" Garg said.

The banking system is not waiting at the trading desk. It is signing off at the margin desk.