BNY and Goldman Sachs Team to Tokenize Money Market Funds

The Bank of New York Mellon Corporation (BNY) launched a tokenization project with Goldman Sachs.

The collaboration will see BNY use Goldman Sachs’ blockchain technology to maintain a record of customers’ ownership of select money market funds (MMFs). The companies said in a Wednesday (July 23) press release that the project is “a significant step towards enhancing the utility and transferability of existing MMF shares.”

It’s also the first time that fund managers in the United States have enabled subscription for shares of their MMFs via BNY’s LiquidityDirect and Digital Asset platforms, “the corresponding value of which will be represented through mirrored record tokenization utilizing GS DAP,” Goldman Sachs’ blockchain-based platform, per the release.

BlackRock, BNY Investments Dreyfus, Federated Hermes, Fidelity Investments and Goldman Sachs Asset Management are all participating in the launch, the release said.

“As the financial system transitions toward a more digital, real-time architecture, BNY is committed to enabling scalable and secure solutions that shape the future of finance,” Laide Majiyagbe, global head of liquidity, financing and collateral at BNY, said in the release. “Mirrored tokenization of MMF shares is a first step in this transition, and we are proud to be at the forefront of this first-of-its-kind initiative.”

Mathew McDermott, global head of digital assets at Goldman Sachs, said in the release that using tokens representing the value of shares of MMFs on GS DAP “would enable us to unlock their utility as a form of collateral and open up more seamless transferability in the future.”

BNY will continue to maintain the official books, records, and settlements for the funds within approved guidelines while also enabling mirror tokens on GS DAP to create future opportunities, according to the release.

Meanwhile, tokenization is transforming the way consumers and merchants think about payment security, Valeri Vanourek, vice president of digital products at Discover® Network, told PYMNTS this month.

“The benefits of tokenization haven’t changed,” Vanourek said. “A streamlined checkout process, additional protection as part of the transaction, the account updates in the case of a cardholder’s primary account number being lost or stolen or needing to be replaced, all of those result in a frictionless and secure transaction.”

What has changed is that companies that choose to invest in tokenization for their payment architecture could be best placed to flourish in the next wave of digital commerce.