Tokenized money market funds get more money-like
I wrote yesterday about the SEC guidance on broker-dealer capital requirements for stablecoins – here’s another seemingly small technical regulatory tweak with a potentially huge impact.
The SEC has granted an exemption for WisdomTree’s tokenized money market fund WTGXX that allows it to be traded by an authorized broker-dealer at $1.
This may at first seem like a distinction without a difference since that’s the NAV money market funds (MMFs) aim for anyway.
The big deal is that MMFs usually settle in a primary market transaction – directly with issuers – once a day, with the issuers executing the corresponding adjustment in the portfolio of backing assets, and bearing responsibility for the fund’s liquidity.
Under the exemption, the fund can trade on a secondary platform at a fixed price of $1, with the broker-dealer providing the liquidity. In this case, the broker-dealer will be WisdomTree Securities (with settlement in USDC) so the activity is not leaving the firm’s ecosystem, but this is a step towards externalizing liquidity for MMF issuers.
Why is this a big deal? Because it means the fund can change hands without requiring an underlying the portfolio adjustment, removing an arguably unnecessary point of market friction. And since any sale or purchase of WTGXX does not need to wait for end-of-day pricing, it can trade at any time.
What’s more, since WTGXX accrues yield continually throughout the day – unlike typical MMFs that get returns calculated once a day – investors can use the token for intraday yield.
For now, this is only available to institutional investors, but the firm has plans to roll it out for retail participants later this year.
Here’s why this seemingly small exemption is potentially more meaningful for the stablecoin outlook than any number of adoption or new token launch announcements:
1 – Broader trading hours enables WTGXX to act as a more flexible reserve asset for stablecoins under the GENIUS Act. More flexible reserve assets that can satisfy stablecoin redemptions at any time should reassure regulators concerned about any liquidity impact to the treasury market, with a broker-dealer shouldering some of the timing risk.
2 – WTGXX can provide yield for stablecoins. Idle balances can be swept into a tokenized MMF, and out again when they need to move – a simple, clean way to make the bank lobby objections irrelevant. True, for this to be useful for all stablecoin market participants, more tokenized MMFs will need similar exemptions, and will need to be available to a wider range of holders (not just accredited investors), but that seems to be on the horizon. WisdomTree has shown it can be done.
3 – This move is a step towards money market funds themselves being considered a settlement asset. After all, they are backed by the same reserves as stablecoins – the main differences are their classification as a security, and their restricted trading flexibility. This move from the SEC goes some way towards solving for the latter. And it’s probable that restrictions on access to and transferability of tokenized money market funds will be further relaxed as part of the agency’s preparation for tokenized markets. If the tokens have an assured value of $1, the only reason they can’t be used as “money” is their security classification and the resulting trading restrictions.
This is one of the more meaningful steps I’ve seen in a while. On its own, it won’t be transformative – WTGXX distribution is still heavily concentrated (over 95% of circulating supply is held by five addresses) – but it’s a step towards broader distribution and utility for the fund, and a welcome signpost on the path toward blurring the boundaries between money and securities.
Big reforms are welcome, but it’s the little tweaks that end up having the biggest real impact.
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I share your view that this is a big deal. Will put something on LinkedIN later today.
This is exactly how yield should be handled in tokenized markets. The SEC exemption for WTGXX modernizes market structure, giving a glimpse of 24/7 liquidity, intraday accrual, and continuous settlement. Tokens generating return from managed assets are securities, FDIC-insured deposits remain a separate banking lane, and this is the early architecture for round-the-clock markets set to reshape financial services faster than most expect.
Regulatory shifts matter structurally when they alter funding behaviour. The markets that adjust first are the ones pricing credit and risk transfer, not the ones chasing narratives.