JPMorgan Files Tokenized Money Market for Stablecoin Issuers

JPMorgan has filed to launch a tokenized money market fund on Ethereum, which will allow stablecoin issuers to hold reserves that back their stablecoins while earning interest.

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

Investors are subject to a minimum investment of $1 million, and the fund carries an annual fee of 0.16% after withdrawal. The fund is managed by Kinexys Digital Assets, JPMorgan's blockchain division. The investment bank has not announced when it will launch the fund, but said the registration will be effective from Wednesday.

Blockchain-based tokenization has drawn increasing 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, not including stablecoins, have currently been exchanged onchain, according to RWA.xyz data. Almost every major asset class is covered, including commodities, stocks, bonds and real estate.

Source: Token Terminal

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

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 runs on Ethereum. MONY holds short-term debt securities designed to deliver higher returns than bank deposits, with interest and dividends compounded daily.

The JLTXX filing also comes after JPMorgan participated in a pilot transaction last week, in which the first simulated US Treasury funds were moved in seconds via the XRP Ledger and interbank rails to one of JPMorgan's Singapore bank accounts.

In April, Morgan Stanley launched the Stablecoin Reserves Portfolio, which allows stablecoin issuers to back their fiat-peg tokens in the bank's money market fund while earning interest.

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However, the International Monetary Fund highlighted a number of concerns about tokenization in a report released in April, arguing that tokenization would shift risk from the banking system to shared ledgers and smart contract code, making it more difficult to intervene in “times of stress.”

The IMF added that without legal transparency in ownership records and settlement summaries, tokenized markets could become “fragmented and interconnected”.

Several industry experts, including “Shark Tank” investor Kevin O'Leary, say crypto market structure legislation – such as the Clarity Act – is needed to address these issues.

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