JPMorgan Files Tokenized Money Market For Stablecoin Issuers

JPMorgan has filed to launch a tokenized money market fund on Ethereum, allowing stablecoin issuers to hold reserves backing their stablecoins in a regulated, cash-like vehicle while earning interest.

The “OnChain Liquidity-Token Money Market Fund,” ticker JLTXX, will invest in US Treasury bills and overnight repurchase agreements collateralized by US Treasurys or cash, according to a filing Tuesday with the US Securities and Exchange Commission. JLTXX seeks to comply with the GENIUS Act, a stablecoin-focused law signed in July. 

Investors are subject to a $1 million minimum investment, and the fund carries a 0.16% annual fee after waivers. The fund will be managed by JPMorgan’s blockchain unit, Kinexys Digital Assets. The investment bank said the filing becomes effective on Wednesday, though it did not disclose when it would launch the fund.

Blockchain-based tokenization has attracted growing interest from Wall Street executives in recent months, many of whom see the technology as offering greater operational efficiency for trading and settlement than traditional systems. 

More than $32.2 billion worth of real-world assets, excluding stablecoins, is currently tokenized onchain, according to RWA.xyz data. Nearly every major asset class has been tokenized, including commodities, stocks, bonds and real estate.

Source: Token Terminal

Bloomberg analyst Eric Balchunas said JPMorgan’s JLTXX is also a “big deal” because the 0.16% fee is low for a money market fund with a stable asset value.

JPMorgan’s blockchain use cases

The launch of JLTXX follows JPMorgan’s first tokenized product, My OnChain Net Yield Fund, or MONY, which launched in December and also runs on Ethereum. MONY holds short-term debt securities designed to deliver returns higher than bank deposit rates, with interest and dividends accruing daily. 

The filing for JLTXX also comes after a pilot transaction JPMorgan participated in last week, in which the first tokenized US Treasury fund moved from the US via XRP Ledger and interbank rails to one of JPMorgan’s Singapore bank accounts in a matter of seconds.

In April, Morgan Stanley launched the Stablecoin Reserves Portfolio, which allows stablecoin issuers to park reserves backing their fiat-pegged tokens in one of the bank’s money market funds while earning interest.

Related: Stablecoins behave like FX markets as liquidity splits: Eco CEO 

However, the International Monetary Fund flagged several concerns about tokenization in a report in April, arguing that tokenization shifts risk from the banking system to shared ledgers and smart contract code, making it more difficult to intervene during “stress events.” 

The IMF added that without legal clarity over ownership records and settlement finality, tokenized markets risk being “fragmented and peripheral.” 

Several industry pundits, including “Shark Tank” investor Kevin O’Leary, have said crypto market structure legislation —  such as the CLARITY Act — is needed to iron out these issues.

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