BNY Launches New Money Market Fund for Stablecoin Issuers

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00:00Let's start with just what this is, a money market fund for stablecoin issuers.

00:05What exactly does that mean?

00:06Sure. So as you said, the Genius Act was a landmark legislation

00:10that really removed a key barrier to the growth of stablecoins and issuance in the U.S.,

00:16which was really creating that regulatory framework that everyone's been needing and wanting to understand how to structure these.

00:24And with the passage of the Genius Act, what we've launched with the BNY Dreyfus Stablecoin Reserves Fund,

00:31which actually went live yesterday, is essentially a way for stablecoin issuers to access the same liquidity,

00:39resiliency and stability of our money funds and also comply with the reserve requirements in the Genius Act.

00:47And while it hasn't gone, you know, the Genius Act will take a little while to go into effect.

00:52We do expect that we'll see migration sooner than later.

00:56And just to be specific, the difference between this money fund and the traditional money fund

01:00is that the maturity of the securities, the U.S. Treasury repo and Treasury securities,

01:06must be 93 days or less, which is a little bit shorter than a traditional money fund.

01:11It's really interesting. And you think about the stablecoin environment,

01:15and I think a lot of people at this point know about Tether.

01:18They know about Circle. But you think about the variety of stablecoin issuers out there.

01:22Theoretically, this money market fund is for any number of them?

01:27Yes. And we do believe there will be many more of them.

01:29In fact, BNY just published a, I'll call it a primer or an outlook on the digital asset industry

01:36and what we think will happen.

01:37And in that, we talk a little bit about this space, not just tokenized money funds,

01:41but the sort of what we call programmable money complex, right?

01:45So tokenized money funds, stablecoins, tokenized deposits.

01:49And our projection is that we could see that entire sort of set of programmable money

01:55and cash equivalents grow to as much as $3.6 trillion in five years.

02:01That's 2030.

02:02And you have a sense here that the people that are coming into this,

02:05they're going to be comfortable with the return on that cash.

02:08They're not going to be seeking something a little bit greater,

02:10something maybe with a little bit more leverage. They're fine.

02:13Well, again, there's requirements that if you think about what the Genius Act actually says,

02:17it's pretty prescriptive in terms of the reserve requirement that a stablecoin issuer has to use.

02:23So if you think about it, right, they have the choice of either investing in these types of securities themselves

02:28or actually using a money fund.

02:31And so if you think of what the core business of a stablecoin issuer is,

02:35it's probably not to invest in the securities themselves.

02:37So they'd much rather use a proven and trusted.

02:40Are you surprised by this?

02:41I mean, I think about, you know, you think about what the crypto industry is,

02:44and then you think about BNY, which is kind of like the oldest of the oldest banks out there.

02:47You know, and it's safe.

02:49I mean, I don't mean there's disparaging,

02:50but you guys are kind of like the vanilla ice cream of the financial markets.

02:53And meanwhile, you know, crypto is like, I don't know, you know, what we want to call that.

02:57And so that's kind of the melding of these worlds.

02:59And you see that deepening, that relationship deepening between the two?

03:02I would say it a little bit differently, right?

03:04So cash and liquidity are the lifeblood of a custody bank.

03:08It's what runs through the arteries and veins of our ecosystem at BNY.

03:12And I'm sure you've heard us talk about the 20% of global capital market assets

03:16that traffic through BNY's infrastructure every single day.

03:20So we're really, what we're doing as BNY is trying to bridge the traditional infrastructure

03:25that the whole financial industry traffics on to the digital infrastructure.

03:30And cash is the cornerstone of the digital ecosystem that allows you to move from one to the other.

03:35So as you think about a world where we're moving from traditional,

03:39where there's market hours and there's all these frictions in the market, right,

03:42to move toward a 24-7 environment, we won't get there tomorrow.

03:46You're going to have to bridge from one to the other.

03:48And cash, which is the lifeblood of our bank, is what gets us there.

03:52I will say, since I've promised Katie, I would give her a better turn.

03:56Lay it on me.

03:56Go ahead.

03:57You know, I like to think of both structurally and cyclically.

04:00Cash is kind of where the cool kids are hanging out these days, right?

04:03Katie teases me about saying cash is sexy.

04:05I found it.

04:06You said that in July of 2022, which is pretty amazing because you think about money market funds,

04:11where we were then.

04:12There was about $4.6 trillion in money market funds, July 2022.

04:17That felt like a lot.

04:18Then you think about where we are right now, $7.5 trillion.

04:22I mean, how do you explain just this insatiable and building demand for money market funds?

04:27So there's a couple of things, right, from a cyclical perspective.

04:30Cash is pretty attractive right now, right?

04:32In a money market fund, you're getting almost a 4% yield, notwithstanding what the Fed may or may not do in December.

04:37And relative to both the volatility and predictability and sort of safety and soundness of other asset classes,

04:45it looks still pretty attractive.

04:46What's probably even more interesting when you think about it is if you think about the Fed's neutral rate,

04:51we could debate is it 2.5%, is it 3%, right?

04:54What that tells you, though, if that's where that rate is,

04:58that this allocation that you see in money funds in a given portfolio is probably here to stay for a while.

05:04I would say, though, that what's really most exciting about it is cash is really at the vortex of all of this change.

05:11It's facilitating and enabling the rails of today to become the rails of tomorrow and to be able to go back and forth.

05:17And that's really where BNY, as you said, is the oldest bank in this country,

05:22the first ever listed on the New York Stock Exchange.

05:24We're really proud to be kind of leading the way for our clients.

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