Natively tokenized mutual fund shares from BNP Paribas Asset Management are launched on Allfunds platform.
BNP Paribas Asset Management Embraces Blockchain for Money Market Funds
BNP Paribas Asset Management (BNPP AM) has taken a significant step towards blockchain-native fund management by issuing a natively digital share class of a money market fund (MMF) on the Allfunds blockchain. This move is part of a growing industry trend to digitize fund shares directly on blockchain platforms.
Natively Digital Shares: The Future of MMFs
Unlike traditional "tokenized" shares, which are digital receipts linked to off-chain assets, natively digital shares represent the actual ownership instrument issued and recorded on-chain. This approach eliminates counterparty risk and reliance on off-chain recordkeeping infrastructure.
The benefits of natively digital shares extend beyond traditional institutional investors. They can potentially broaden access to retail and new investor segments by lowering entry barriers and enabling fractional ownership with digital wallets.
Improved Efficiency and Liquidity
With shares existing as tokens on blockchain, transactions can settle instantly or near instantly, removing the traditional delays and complexities of clearing and settlement in money market funds. This improved efficiency can lead to enhanced liquidity and better collateral usage, as institutional investors can more easily trade these digital shares and use them as collateral.
Smart Contracts and Compliance
Smart contracts enable built-in governance rules, compliance automation, and distribution mechanisms directly on-chain, reducing manual reconciliation and operational risk for fund managers and investors.
BNPP AM's Blockchain Journey
BNPP AM has been at the forefront of the digitization and early adoption of blockchain for funds. They have explored projects creating digital share classes that enable on-chain issuance and management of MMF shares, integration with institutional digital platforms supporting real-time digital asset operations, and enhanced transparency and auditability for investors and regulators.
This aligns with similar innovative projects by major financial firms like Goldman Sachs and BNY Mellon, which have launched blockchain-native tokens representing shares in MMFs to modernize fund infrastructure and trading.
Exploring New Horizons
With the recent issuance of natively digital MMF shares, BNPP AM is exploring the potential of tokenized MMFs for retail investors. The solution allows for efficiencies and moving away from batch subscription and redemption to on-demand transactions based on NAV valuations.
Furthermore, BNPP AM has a second blockchain solution, the private permissioned Neobonds platform, which was used for the issuance of a sovereign bond by Slovenia. The use of the Neobonds platform for the Slovenian bond transaction demonstrates its applicability to sovereign bonds.
Looking Ahead
The tokenization of MMFs could broaden distribution and offer enhanced liquidity, as suggested by Paul Daly, Head of Distribution Products & Solutions, Securities Services at BNP Paribas. With the potential for faster settlement once the European Central Bank rolls out its wholesale DLT settlement solution, the future of blockchain-native fund management looks promising.
- Natively digital shares, like those issued by BNPP AM for their money market fund, can potentially provide improved access for retail investors, as digital wallets can lower entry barriers and enable fractional ownership.
- Blockchain technology, through the use of smart contracts, can offer a more efficient and automated system for fund management, reducing manual reconciliation and operational risk for both fund managers and investors.
- The tokenization of money market funds (MMFs), such as the recent issuance by BNPP AM, could lead to broader distribution and enhanced liquidity, especially with the potential for faster settlement once the European Central Bank rolls out its wholesale DLT settlement solution.
