JPMorgan Says Stablecoins Continue to Hold an Advantage Over Tokenised Money Market Funds

In a new report, JPMorgan Chase stated that tokenised money market funds still account for only around 5% of the total stablecoin market despite their ability to generate yield.

The bank noted that participants in the cryptocurrency market continue to prefer stablecoins because they have become the primary monetary instrument of the ecosystem for trading, collateral management, settlements, cross-border payments, and liquidity management across centralised exchanges (CEXs) and decentralised finance (DeFi) protocols.

According to the report, money market funds face a “structural regulatory disadvantage” because they are classified as securities, which imposes restrictions related to registration, disclosure, reporting, and transferability that limit their ability to circulate freely within the crypto ecosystem.

“We doubt that tokenised money market funds will capture more than 10–15% of the overall stablecoin market unless legislative changes reduce the structural disadvantage arising from the classification of tokenised money market funds as securities,” wrote analysts led by Nikolaos Panigirtzoglou.

As a result, according to the bank’s analysts, demand for tokenised money market funds remains largely limited to crypto enthusiasts seeking yield on idle cash and institutional investors wishing to combine blockchain-based settlement and programmability with traditional investor protections.

Supporters of tokenised money market funds argue that these products combine the safety and yield of traditional cash management instruments with the speed and flexibility of blockchain networks.

By placing fund shares on-chain, tokenised funds can enable near-instant settlement, 24/7 transfers, automated regulatory compliance, and more efficient collateral management. Advocates also argue that tokenisation can reduce operational costs, improve transparency, and facilitate smoother movement of assets between trading, treasury, and payment systems.

Tokenised money market funds promise faster settlements and broader accessibility, but they still face liquidity risks, counterparty risks, regulatory uncertainty, and risks tied to the underlying stability of the traditional assets backing the tokens.

Analysts believe these tokenised funds are likely to continue growing faster than stablecoins because of their yield-generating nature, although they are unlikely to exceed 10–15% of the stablecoin market without substantial regulatory reform.

So far, regulators have offered only limited support. The bank pointed to the streamlined process introduced earlier this year by the U.S. Securities and Exchange Commission to simplify the issuance and redemption of blockchain-based money market funds.

The report also highlighted the emergence of partnerships between traditional financial firms and crypto companies that allow institutions to use tokenised money market funds as collateral for over-the-counter trading while simultaneously earning yield.

Nevertheless, the report stated that these developments remain “marginal” and are unlikely to overcome the broader regulatory disadvantages preventing tokenised money market funds from functioning as seamlessly as stablecoins within cryptocurrency markets.

See also: "Expert Analyst Assesses the Current Bitcoin Situation: “An Unfavourable Trend Has Formed”"

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