07-18-2025 
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Tokenized money market funds have recorded an 80% surge in the first half of the year and have been the digital asset industry’s fastest-growing sector. This rise is now causing concerns among regulators, with the French central bank warning that it could threaten financial stability.
In a recent report, the Banque de France stated that tokenized MMFs could “create new contagion channels to financial markets.”
One of the bank’s main concerns is the interconnectedness with the digital currency sector. It says that digital currency investors could purchase the tokenized MMFs in periods of high volatility and uncertainty as a hedge. Once the market stabilizes, they will likely sell these instruments en masse, driving down the value of treasuries.
Unlike legacy finance, the digital asset market operates 24/7 all year round. According to the top bank, this introduces a risk of a gap in asset prices and liquidity mismatch between the two markets, which will now be intricately interconnected through the tokenized MMFs.
If redemption requests for these instruments shot up outside the legacy finance operating hours, the issuer would be unable to liquidate the entirety of the underlying assets, resulting in contagion to the wider traditional banking sector.
Beyond the contagion, these MMFs face the same risks that have plagued the digital asset industry for years, Banque de France added. This includes limited blockchain interoperability, fragmented liquidity, and a concentration of service providers, which comes with its centralization risks.
“Nevertheless, the risks appear to be contained for the moment as the tokenised money market fund market remains quite small,” the bank concludes.
But while the market may be small, it’s growing aggressively, data shows. According to rwa.xyz, tokenized U.S. Treasuries are now a $7.5 billion market, an 82% spike this year alone.
However, Banque de France’s concerns about centralization risks are valid, as according to the data, BlackRock (NASDAQ: BLK) accounts for $2.8 billion in tokenized Treasuries, which translates to 37% of the market. BlackRock has been using its influence to grow its market share further; last month, for instance, it struck a deal with Deribit and Crypto.com, and the two exchanges now accept its tokenized fund as collateral.
Overall, tokenized real-world assets are now a $25.4 billion market, with private credit leading the pack at $14.7 billion. Experts estimate that the market value will double by the end of this year.Experts believe that tokenized funds will become an even bigger market than stablecoins, which have now hit $260 billion in market cap.
“Stablecoins were the place holder, tokenised money market funds are the real deal. Traders are starting to make the switch. Tokenisation provides a cheaper and easier way to buy mutual funds, and liquidity is enhanced,” commented Olivier Portenseigne from Clearstream, Europe’s second-largest post-trade infrastructure provider.
McKinsey & Company further estimates that tokenized mutual funds will become a $2 trillion market by 2030. In comparison, traditional money market funds hold $7 trillion in assets.
The tokenized funds are expanding beyond the U.S. into frontier markets. Last week, the Dubai Financial Services Authority (DFSA) approved the region’s first tokenized MMF, launched jointly by the Qatar National Bank and DMZ Finance.
APAC banks target AI to boost returns
Elsewhere, banks in the Asia-Pacific (APAC) region are investing in artificial intelligence (AI) to drive their revenue growth, a recent report by consultancy firm Accenture reveals.
“…over 90% of global banking executives feel that the pace of change has accelerated over the past six months, and they expect it to accelerate even further in the next six months,” said Lead Masashi Nakano, the company’s managing director for APAC.
The report revealed that banks in the region intend to invest at least $3 billion in AI over the next three years.
“As banks across Asia continue to navigate pressures, such as falling interest rates, they have rising credit risk and global uncertainties and are exploring every avenue of growth…[AI] is increasingly seen as a driver for revenue growth,” stated Nicole Bodack, the region’s capital markets lead at Accenture.
APAC banks expect double-digit revenue growth by integrating AI, she added.
But while these lenders pursue AI-boosted revenue, only a handful are fully prepared to integrate the technology. Accenture says that only 10% of APAC banks are ready to scale AI.
“The 10% leading in AI adoption have validated specific AI use cases. And most importantly, they have scaled their strategic bets that are most relevant to the industry,” Bodack noted.
Watch: Tim Draper talks tokenization with Kurt Wuckert Jr.
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