EXPERT OPINION | Stablecoins Will Maintain Dominance Over Tokenized Funds Due to Regulation, Says America’s Largest Bank

Wall Street bank, JPMorgan, has said stablecoins are likely to maintain their dominance over tokenized money market funds despite the latter offering yield, citing regulatory constraints that continue to limit broader adoption of tokenized funds within crypto markets.

In a report, JPMorgan estimated tokenized money market funds account for only about 5% of the overall stablecoin market. The bank said stablecoins remain the preferred instrument across

• crypto trading,
• collateral management,
• payments, and
• liquidity operations

because they function more seamlessly across centralized exchanges and decentralized finance protocols.

The analysts, led by Nikolaos Panigirtzoglou, said tokenized money market funds face a ‘structural regulatory disadvantage’ because they are classified as securities, subjecting them to

• registration,
• disclosure, and
• transfer restrictions

that do not apply to most stablecoins.

JPMorgan said that without major regulatory reforms, tokenized funds are unlikely to grow beyond 10% to 15% of the stablecoin market as a result.

“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 analysts said.

Asset managers, including BlackRock and Janus Henderson, have also expanded tokenized fund offerings with new infrastructure aimed at enabling near-instant redemptions into stablecoins.

JPMorgan said tokenized money market funds are expected to still grow faster than stablecoins because of their yield-bearing nature, particularly among institutional investors seeking on-chain settlement combined with traditional investor protections. However, the bank warned that

• regulatory uncertainty,
• liquidity concerns, and
• counterparty risks

continue to weigh on adoption and will not fundamentally change the balance between the two markets.

Analysts have described recent regulatory developments, such as:

• a streamlined process for issuing on-chain money market funds, and
• allowing institutional investors to use on-chain money market funds as off-exchange trading collateral

as only ‘marginal’ improvements that are unlikely to change the broader picture.

Stablecoins, by contrast, have increasingly become the core settlement layer of the crypto economy with their role expanding beyond trading into cross-border payments and treasury management.

Industry executives speaking at recent crypto conferences have described stablecoins as a key bridge between traditional finance and digital assets.

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