Financial institutions BNY Mellon and Goldman Sachs collaborate to digitize money market funds using tokenization technology
In a groundbreaking move, The Bank of New York Mellon (BNY) and Goldman Sachs have joined forces to tokenize money market funds (MMFs) using blockchain technology. This collaboration marks a significant step in integrating blockchain into traditional financial infrastructure, although no specific plans for the use of permissionless blockchains have been announced.
The initiative, which includes major players such as BlackRock, BNY Mellon Investment Management’s Dreyfus, Federated Hermes, Fidelity Investments, and Goldman Sachs Asset Management, is currently centered on private blockchain technology for tokenization. BNY Mellon is leveraging Goldman Sachs' private blockchain platform, GS DAP, to maintain a mirrored tokenized record of customer ownership in select money market funds.
The initial functionality of the solution is subscription and redemption, but the future goal is collateral mobility. Laide Majiyagbe, Global Head of Liquidity, Financing and Collateral at BNY, stated that this is a first step in the transition toward a more digital, real-time architecture. Mathew McDermott, Global Head of Digital Assets at Goldman Sachs, added that the solution would enable the unlocking of MMFs' utility as a form of collateral and open up more seamless transferability in the future.
Investors can subscribe to and redeem shares through BNY’s LiquidityDirect platform, which integrates with its digital assets platform and Goldman Sachs’ blockchain technology. Notably, most tokenized money market funds to date have targeted the crypto community, whereas this solution has an institutional focus.
While the current focus is on U.S. money market funds, both institutions have expressed interest in expanding this model globally and potentially applying similar technology to other fund structures and asset classes. The Canton Network, a logical middle ground for institutional use cases, is further decentralizing over time. Goldman Sachs participates in the governance of the Canton Network, which is operated by Digital Asset, one of the organizations working on institutional tokenized collateral projects, alongside DTCC, ICE, and CME.
GS DAP uses Digital Asset's Canton blockchain technology, and the private permissioned GS DAP blockchain will be used for Phase One, with potential use of a high-profile crypto permissionless network in future phases. The mirrored tokens of the tokenized MMF shares will be on the Goldman Sachs GS DAP blockchain, while BNY will continue to keep the official books and records for the funds.
In summary, the BNY Mellon and Goldman Sachs collaboration is currently centered on private blockchain technology for tokenization, with potential future expansion that could explore broader applications. However, no specific plans for permissionless blockchain use have been announced. This initiative is a significant step towards digitalizing the financial infrastructure and unlocking the potential of money market funds as a form of collateral.
- The collaboration between The Bank of New York Mellon (BNY) and Goldman Sachs involves tokenizing money market funds (MMFs) using private blockchain technology, specifically GS DAP.
- BNY Mellon is utilizing Goldman Sachs' private blockchain platform for the tokenization of select money market funds, with initial functionality focused on subscription and redemption.
- The project, which also includes major players such as BlackRock, has an institutional focus and aims for collateral mobility in the future.
- Goldman Sachs' participation in the governance of the Canton Network, along with other institutions, indicates potential future applications of blockchain technology beyond tokenized MMFs.
