JPMorgan: Yield-Bearing Tokenised Funds Won’t Replace Stablecoins Anytime Soon

JPMorgan analysts say tokenised money market funds are unlikely to replace stablecoins as crypto’s dominant liquidity instrument despite continued growth driven by investor demand for yield. The bank estimates the sector currently accounts for roughly 5% of the size of the stablecoin market.

The report, led by managing director Nikolaos Panigirtzoglou, said stablecoins remain the preferred onchain cash instrument because they are widely used throughout the crypto ecosystem for payments, trading activity, collateral management, settlement and liquidity operations across both centralised and decentralised platforms.

By comparison, tokenised money market funds face regulatory constraints because they are treated as securities. JPMorgan said this classification creates compliance burdens including registration obligations, disclosure rules, reporting requirements and restrictions on transfers, limiting how seamlessly the products can circulate across blockchain-based financial markets.
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Institutions Drive Early Demand 

The analysts said tokenised funds currently appeal mainly to institutional investors seeking operational benefits such as quicker settlement and blockchain programmability, alongside crypto-native users looking to generate returns on idle holdings.

JPMorgan said the yield-bearing nature of tokenised money market funds should allow them to continue expanding faster than stablecoins. However, the bank does not expect that growth to substantially disrupt the market structure already established by stablecoins.

Analysts expect tokenised money market funds to stay well below stablecoins in scale, likely topping out at around 10%–15% of the market unless regulatory changes ease the compliance constraints tied to their treatment as securities. 

The report noted that regulators have introduced some limited measures aimed at simplifying issuance and redemption processes for onchain money market funds. JPMorgan also highlighted efforts allowing institutions to use tokenised funds as trading collateral while continuing to earn yield, although it said these changes remain insufficient to close the regulatory gap with stablecoins.

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