JPMorgan Says Tokenized MMFs Unlikely to Surpass Stablecoins Because of Regulatory Hurdles

JPMorgan said tokenized money market funds are structurally unlikely to overtake stablecoins.

CoinDesk reported on May 21 that, in a report published May 20, JPMorgan said 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 because they have become the default medium of exchange across centralized exchanges, decentralized finance, payments and cross-border transfers.

JPMorgan also said tokenized MMFs face a structural regulatory disadvantage. Because MMFs are classified as securities, they are subject to registration, disclosure, reporting and transfer restrictions.

Those limits constrain the smooth circulation of tokenized MMFs within the crypto ecosystem.

Without regulatory changes to ease the structural disadvantages created by their classification as securities, tokenized MMFs would struggle to grow beyond 10% to 15% of the overall stablecoin market, JPMorgan said.

Demand also remains limited. JPMorgan said current demand is concentrated among crypto investors seeking to deploy idle cash and institutional investors looking to combine blockchain-based payment functions with existing investor protections.

The bank did point to some signs of regulatory improvement. It highlighted a move earlier this year by the U.S. Securities and Exchange Commission to streamline issuance and redemption procedures for tokenized MMFs.

Still, JPMorgan said the changes remain modest and that tokenized MMFs face a sizable regulatory disadvantage in matching the seamless usability of stablecoins.