BNY and Goldman Sachs Launch Tokenized MMF Solution (BNY)
Bank of New York Mellon (BNY) and Goldman Sachs (GS) have launched a blockchain platform to tokenize money market funds (MMFs). The solution utilizes BNY’s LiquidityDirect platform integrated with GS’s GS DAP private blockchain technology platform to create “mirror tokens” representing MMF shares, with participation from major fund managers. While BNY continues to maintain official books and records within current regulatory guidelines, the tokenized representation aims to enhance the utility and transferability of MMF shares, potentially enabling their use as collateral and facilitating more seamless transfers in digital capital markets. GS DAP is built on Digital Asset’s Canton technology, which offers configurable privacy. Notably, GS has announced plans to spin GS DAP off into an industry-owned independent entity, which would considerably broaden its reach and potential application. [Read more at BNY]
Digital Economy, Stablecoins and the Global Financial System (NBER)
The U.S. NBER published a paper that examines the macro-financial implications of a growing digital economy, focusing on stablecoins. The authors develop a three-region model—comprising the U.S., the rest of the world (RoW), and a decentralized “digital economy”—to study how stablecoins affect global financial markets. While stablecoins may increase the demand for safe dollar-denominated reserves, they may also serve as substitutes, reducing the global demand for traditional reserve assets. The paper finds that in the long run, the reserve demand effect dominates: the proliferation of stablecoins leads to lower US interest rates and increased US foreign borrowing and reinforcement of the U.S.’s “exorbitant privilege.” . The model also shows that this expansion raises idiosyncratic consumption volatility in the US while reducing it in the RoW. Key channels of influence include both increased financial demand for digital assets and substitution of traditional services with digital alternatives. [Read more at the NBER]
Upcoming Speaking Engagements:
The CB+DC Conference (Nassau, Bahamas, September 9-11) is a premier gathering centered on CBDCs, tokenized assets, and stablecoins. It provides a forum for central bankers, commercial bankers, technology innovators, policymakers, and academics to explore the latest advancements in digital currency, engage with experts and peers, and discuss the future of digital currency. [Register here but before you do, email me at john@kiffmeister.com for a 15% discount]
I produce a monthly digest of digital fiat currency (DFC) developments exclusively for the official sector (e.g., central banks, ministries of finance and international financial institution (e.g., the BIS, IMF, OECD, World Bank)) plus academics and firms that are active in the DFC space (commercial banks, technology providers, consultants, etc.). (DFCs include central bank digital currency (CBDC), stablecoins and tokenized deposits.) It goes out via email on the first business day of every month, and if you’re interested in being on the mailing list, please email me at john@kiffmeister.com.
