- Securitize updates BlackRock‘s BUIDL money market fund to allow intraday redemptions and daily interest payments.
- Different approaches exist for interest distribution in tokenized money market funds: direct payouts vs. token accumulation.
- USYC, now owned by Circle, uses token accumulation model to reduce administrative complexity for collateral usage.
- Tokenized money market funds serve multiple purposes: collateral, stablecoin reserves, and treasury management.
- Alternative designs include streaming payments and separate trading of interest components.
Securitize, the tokenization partner for BlackRock’s BUIDL money market fund, has implemented changes to allow daily interest payments and intraday redemptions, marking a significant development in the tokenized asset landscape.
The Interest Distribution Dilemma
The modification highlights a growing debate in the tokenized money market fund sector. While BUIDL opts for direct interest payments, Hashnote’s USYC fund—recently acquired by Circle—takes a different approach by accumulating interest within the token value.
Leo Mizuhara, CEO of Hashnote, explained their strategy: “When we built USYC we were very much focused on using it as a collateral asset. Our guiding star is to make products that are better than the TradFi equivalent.”
Market Applications and Use Cases
Tokenized money market funds serve multiple purposes in the digital asset ecosystem. The CFTC market advisory committee is evaluating their use as margin for options trading. Eurex Clearing, a German central counterparty, recently received regulatory approval for digital collateral usage.
In traditional markets, Broadridge already processes $1.5 trillion monthly in tokenized Treasury transactions on a permissioned blockchain for intraday repurchase agreements.
Innovation in Design Approaches
The industry is exploring alternative structures for interest distribution. Streaming payments, common in cryptocurrency lending protocols, offer continuous interest accrual. A precedent exists in traditional finance, where Goldman Sachs and the Hong Kong Monetary Authority demonstrated separate trading of green bond components in 2022.
However, recent events with the Usual stablecoin highlight the importance of clear design parameters. The platform faced challenges when questions arose about earnings and redemption possibilities for its staked version, though the base stablecoin maintained its dollar peg.
Today, 97% of USYC tokens serve as stablecoin reserves, demonstrating the market’s current preference for reserve applications over collateral usage.
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