Tokenized Money Market Funds Surge to $5.7B as Institutions Embrace Blockchain Liquidity Tools

04. Jun 2025 Posted by Bailey S. on News

A new wave of digital financial products is gaining traction among institutions, with tokenized money market funds emerging as a favored bridge between traditional finance and blockchain-based innovation. According to a recent Moody’s report released on June 3, these blockchain-backed liquidity vehicles have accumulated $5.7 billion in assets since 2021.

Designed to replicate traditional money market funds—typically backed by low-risk instruments like U.S. Treasurys—tokenized versions offer a digital edge: real-time settlement, improved compliance tracking, and enhanced operational efficiency via blockchain infrastructure. Moody’s notes that the growing interest is not just speculative; it’s strategic.

Traditional financial players—asset managers, insurers, and brokerages—are increasingly drawn to tokenized short-term funds as a tool to optimize client cash flows and integrate digital asset exposure. The credit agency foresees these funds becoming a go-to solution for managing uninvested cash, likening them to “cash-sweep” products but in digital form.

Moody’s report points to several emerging use cases:

  • Institutional investors may favor these over stablecoins for yield opportunities.

  • Insurance firms could leverage them for short-term liquidity management.

  • Traders and lenders might use them as blockchain-native collateral.

A few key firms are leading the charge. BlackRock tops the list with its USD Institutional Digital Liquidity Fund managing $2.5 billion. Franklin Templeton’s OnChain US Government Money Fund follows with $700 million, while Superstate, Ondo Finance, and Circle collectively manage hundreds of millions more.

Tokenization is also becoming a gateway to new markets. Germany-based Midas recently launched a tokenized certificate tied to U.S. Treasury bills, aiming at European retail and institutional investors with no minimum investment requirement. Meanwhile, Robinhood is pushing for broader adoption: not only has it offered European users access to U.S.-backed tokenized products, but it's also proposed a regulatory framework to the SEC that could shape the future of tokenized finance in the U.S.

Despite its promise, the sector isn’t without risks. Moody’s flags concerns about cyberattacks, smart contract bugs, and inconsistencies in ownership records between blockchain and traditional registries. These blockchain-specific vulnerabilities add a new layer of risk atop the typical credit and liquidity concerns associated with money market instruments.

Still, the trajectory is clear. With $7 trillion parked in U.S. money market funds as of December 2024, the tokenized subset—though still small—appears poised for significant growth.

As Robinhood CEO Vlad Tenev put it, “Tokenization represents a new paradigm for institutional asset allocation.” Institutions seem ready to agree.