Tokenized Money Market Funds unlikely to challenge stablecoin dominance — JPMorgan

Tokenized money market funds are gaining traction as yield-generating alternatives to stablecoins, but remain a minor segment of the broader digital asset ecosystem, according to a report from JPMorgan.

The bank noted that despite their appeal, these instruments are yet to challenge the dominant role of stablecoins in everyday crypto activity. Stablecoins are still widely used for trading, collateral management, settlements, cross-border payments and liquidity provision across both centralized and decentralized platforms.

Stablecoins maintain dominance amid growing tokenization market

The deep integration of stablecoins into blockchain infrastructure and ease of transfer give them a clear functional advantage over tokenized money market funds, JPMorgan noted.

A key limitation for tokenized MMFs stems from their regulatory treatment. These funds are classified as securities, requiring compliance with strict rules around registration, disclosures, reporting and transfer restrictions. 

The requirements reduce their flexibility onchain and create friction for users compared to the near-instant, permissionless nature of stablecoins. As a result, adoption has been concentrated among more specialized participants, according to JPMorgan. Crypto-native users often allocate idle capital to these funds to earn yield, while institutional players are drawn to their hybrid structure.

Several risks also continue to weigh on broader adoption, including concerns around liquidity, counterparty exposure, regulatory uncertainty and the reliability of underlying traditional assets.

However, recent regulatory developments from the US Securities and Exchange Commission (SEC) around onchain issuance and redemption could be seen as progress. Regardless, JPMorgan suggests these steps are not sufficient to fully close the gap with stablecoins.

"We doubt that tokenized money market funds would grow beyond 10-15% or so of the stablecoin universe, unless there is a regulatory change that reduces the structural disadvantage arising from tokenized money market funds classified as securities," the bank noted.

The remarks come as JPMorgan expanded its tokenized products with the launch of the JPMorgan OnChain Liquidity–Token Money Market Fund (JLTXX), a US-registered government money market fund deployed on the Ethereum blockchain.

The fund, which invests in US Treasury securities and overnight repurchase agreements, follows the bank’s initial tokenized product, My OnChain Net Yield Fund (MONY), introduced late 2025. The vehicle is designed to provide institutional investors with near-instant settlement, continuous 24/7 access and yield exposure to short-term government debt.