JPMorgan Says Tokenized MMFs Unlikely to Otake Stablecoins Because of Regulatory Hurdles
Summary
- JPMorgan said tokenized MMFs are structurally unlikely to surpass stablecoins and currently account for only about 5%% of the market.
- JPMorgan said tokenized MMFs face a structural disadvantage versus stablecoins because they are classified as securities and are subject to registration, disclosure, reporting and transfer restrictions, limiting their circulation in the crypto ecosystem.
- JPMorgan said that without regulatory change, tokenized MMFs would struggle to grow beyond 10%% to 15%% of the overall stablecoin market, with current demand limited to crypto investors and institutional investors.
Forecast Trend Report by Period
JPMorgan said tokenized money market funds face structural barriers to overtaking stablecoins.
CoinDesk reported on May 21 that JPMorgan wrote in a May 20 report that tokenized MMFs account for only about 5% of the stablecoin market despite offering yield.
The bank said the crypto market continues to favor stablecoins over tokenized MMFs. It attributed that to stablecoins having become the default medium of exchange across centralized exchanges, decentralized finance, payments and cross-border remittances.
JPMorgan also said tokenized MMFs are structurally disadvantaged from a regulatory standpoint. Because they are classified as securities, they are subject to registration, disclosure, reporting and transfer restrictions.
Those constraints limit their ability to circulate smoothly within the crypto ecosystem.
Without regulatory changes to ease the structural disadvantages tied to their classification as securities, tokenized MMFs would struggle to grow beyond 10% to 15% of the overall stablecoin market, the bank wrote.
Demand also remains limited. JPMorgan said current demand for tokenized MMFs is concentrated among crypto investors seeking to put idle cash to work and institutional investors looking to combine blockchain-based payment functions with existing investor protections.
The bank also cited signs of policy progress. It pointed to a move by the US Securities and Exchange Commission earlier this year to streamline issuance and redemption procedures for tokenized MMFs.
Still, JPMorgan said the changes remain modest and that tokenized MMFs face regulatory disadvantages too significant to match the seamless utility of stablecoins.
