The record-breaking debut of a money market exchange-traded fund (ETF) by ProShares last week highlights the huge demand for cash management products as the asset class continues to tokenize, a move that industry advocates argue could help funds remain competitive as U.S. stablecoin adoption increases.
Money market funds invest in short-term, high-quality debt securities, such as U.S. Treasury bills, repurchase contracts, and commercial paper. They are designed to preserve capital while offering reasonable yields and daily liquidity, making them a popular money management vehicle for investors.
Against this backdrop, the launch of the ProShares Genius Money Market ETF (IQMM) is particularly noteworthy. The actively managed fund, which primarily holds short-term government bonds, generated $17 billion in first-day trading volume on Thursday, an unprecedented number for a newly created ETF.
Bloomberg ETF analyst Eric Balchunas noted the surge, noting that IQMM’s debut dwarfed other high-profile launches. BlackRock’s iShares Bitcoin Trust (IBIT) had nearly $1 billion in first-day volume, while BlackRock’s ESG-focused ETF seeded by pension investors had nearly $2 billion in volume.
sauce: Eric Balchunas
Although it was later revealed that much of IQMM’s activity was due to internal allocations, and that ProShares was transferring funds from existing funds to IQMM for treasury management purposes, the launch nevertheless highlighted the scale and strategic importance of the money market vehicle.
Even if the flow wasn’t entirely organic, this move illustrates the importance of money market funds in modern portfolio construction.
Related: Tokenized money market funds soar to $9 billion. BIS warns of new risks
Wall Street’s answer to stablecoins?
This surge is also driven by tokenized money market funds gaining traction on blockchain rails and increasingly positioning themselves as a high-yield alternative to traditional stablecoins.
As dollar-pegged stablecoins expand into payments and decentralized finance, tokenized money market funds are entering the market as a compliant, interest-generating complement within the same ecosystem.
In particular, the ProShares fund carries the “GENIUS” brand. This is because it is structured to comply with the requirements of the GENIUS Act, a law passed last year that establishes a federal regulatory framework for payment stablecoins. The law establishes reserve, transparency, and supervisory standards for issuers and strengthens the role of high-quality liquid assets in backing the digital dollar.
Market strategists are already framing tokenized money funds as a competitive antidote to Wall Street. As Cointelegraph reported last July, JPMorgan strategist Teresa Ho said tokenized money market funds could serve as an institutional alternative to stablecoins, especially in collateral markets.
“Instead of pledging cash or pledging government bonds, you can pledge money market stocks and not lose interest along the way. That speaks to the versatility of money funds,” Ho told Bloomberg, referring to the tokenized money market fund initiative by Goldman Sachs and BNY Mellon.
Growth of tokenized money market funds. sauce: bank for international settlements
The growing role of tokenized money market funds was also highlighted in a November report from the Bank for International Settlements, which stated that tokenized money market funds are the “fastest growing collateral and savings vehicle.”
Related: CryptoBiz: Cryptocurrencies fall, but tokenized RWA and VC advance
