BNY Dreyfus has filed to launch a tokenized money market fund, according to a recent SEC filing for the pending BNY Dreyfus On-Chain Liquidity Fund. The filing, under the Dreyfus Government Cash Management Funds umbrella, says, "The fund seeks as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity.... The fund pursues its investment objective by investing in (i) U.S. Treasury bills, notes, or bonds (collectively, U.S. Treasury securities), (ii) overnight repurchase agreements collateralized solely by U.S. Treasury securities and/or cash, and (iii) cash. The fund is a money market fund subject to the maturity, quality, liquidity and diversification requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended, and seeks to maintain a stable share price of $1.00. The U.S. Treasury securities in which the fund invests have a remaining maturity of 93 days or less or are issued with a maturity of 93 days or less."
It explains, "The fund is a 'government money market fund,' as that term is defined in Rule 2a-7, and as such is required to invest at least 99.5% of its total assets in securities issued or guaranteed as to principal and interest by the U.S. government or its agencies or instrumentalities, repurchase agreements collateralized solely by cash and/or government securities, and cash. The fund seeks to enter into repurchase agreements that present minimal credit risk.... Shares of the fund are intended to serve as reserves backing outstanding payment stablecoins and to meet the needs of clients who prefer digital methods for recordkeeping and transacting. The fund does not invest in stablecoins."
The filing tells us, "The Transfer Agent utilizes an integrated books and records system that incorporates a closed ecosystem of allow-listed wallets on public blockchains, such as Ethereum and Solana, with a traditional books and records system. This integrated system maintains the record ownership of shares of the fund in book-entry form using one or more blockchains and tokens associated with fund shares.... A transfer of the book-entry token on a blockchain results in a near real-time transfer of record ownership of the fund's shares from the transferor to the transferee."
It continues, "Although the blockchain entries constitute the Transfer Agent's official records of share ownership, the Transfer Agent will, as a back-up, maintain a duplicate off-chain record of share ownership and will reconcile the blockchain book-entry records with the duplicate off-chain records on at least a daily basis. Reconciliation involves maintaining a matching book-entry record on-chain and an off-chain record of the total number of shares in circulation, the ownership of the shares at any given time, and all transactions between parties involving the shares. As with any book-entry on its books and records system, the Transfer Agent has the ability to cancel, correct, and amend transactions, and to freeze the book-entry tokens within the closed ecosystem of allow-listed wallets on the public blockchain."
BNY comments, "A distributed ledger is a database in which data is stored in a decentralized manner. A blockchain is an open, distributed ledger that digitally records transactions in a verifiable way using cryptography. Cryptography is a method of storing and transmitting data in a particular form so that only those for whom it is intended can read and process it. A blockchain stores transaction data in 'blocks' that are linked together to form a 'chain,' and hence the name blockchain. Transactions on the blockchain are verified and authenticated by computers on the network. The process of authenticating a transaction before it is recorded ensures that only valid and authorized transactions are permanently recorded as 'blocks' on the blockchain."
They state, "In order to facilitate the use of blockchain technology, a potential shareholder must have a blockchain wallet. Shareholders are required to have a digital wallet maintained for them by a third-party wallet provider approved by the Transfer Agent. The Transfer Agent's approval of the investor's digital wallet and addition of such wallet to the allow-listed ecosystem is solely from the perspective of the Transfer Agent's own compliance obligations and does not constitute an endorsement of any third-party wallet provider or any wallet arrangement for the shareholder by the Transfer Agent, the fund, or any of their respective affiliates. The shareholder is solely responsible for the digital wallet and any third-party wallet provider chosen by it.
The filing adds, "A blockchain wallet is a software application which stores a user's 'private key' and related digital or tokenized assets and is used to facilitate sending digital or tokenized assets on a particular blockchain. The term 'digital assets' as used herein refers to native crypto assets of blockchains or protocols running on top of blockchains, while the term 'tokenized assets' as used herein refers to the creation of a digital representation of a traditional asset, such as the fund shares, on the blockchain or the issuance of such an asset directly on the blockchain."
As with all money market fund filings, it says, "An investment in the fund is not a bank account or a bank deposit. It is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund's yield will fluctuate as the short-term securities in its portfolio mature or are sold and the proceeds are reinvested in securities with different interest rates. BNY Mellon Investment Adviser, Inc. and its affiliates are not required to reimburse the fund for losses, and you should not expect that BNY Mellon Investment Adviser, Inc. or its affiliates will provide financial support to the fund at any time, including during periods of market stress."
BNY writes, "The fund is subject to the following principal risks: Blockchain technology risk: Blockchain technology is a relatively new and untested technology that operates as a distributed ledger. There are risks associated with the fund's issuance, transfer, redemption and recordkeeping of shares on a blockchain, and these risks may not fully emerge until the technology becomes more widely used. Blockchain systems are public and permissionless and could be vulnerable to fraud. Access to a given blockchain requires a private key, which, if compromised, could result in loss due to theft, destruction, or inaccessibility. There is limited regulation of blockchain technology."
Finally, they state, "Shares of the fund are intended to be held by stablecoin issuers as reserves backing their outstanding payment stablecoins and to meet the needs of clients who prefer digital methods for recordkeeping and transacting. Although the fund does not invest in stablecoins or stablecoin issuers, the assets of the fund are expected to fluctuate depending on the creation (minting) of additional stablecoins or the redemption (burning) of such stablecoins. Stablecoins are relatively new and may face periods of uncertainty, resulting in the potential for rapid and/or unexpected requests by stablecoin issuers for redemption of the fund's shares (including requests by multiple stablecoin issuers at the same time)."
For more on Tokenized Money Market Funds, see these recent Crane Data News stories: "JPMAM Launches 2nd Tokenized MMF" (5/14/26), "BlackRock Files for Tokenized MMFs" (5/11/26), "Northern Talks Tokenization, Deposits" (4/22/26), "Earnings: JP Morgan Talks AI Cash Allocation Tool; BNY on Tokenization" (4/20/26), "Invesco to Manage SuperState Tokenized USTB; Weekly MF Port Holdings" (3/25/26), "OMFIF on Tokenised Money Funds" (3/18/26), "Federated's Donahue Talks Tokenized Money Funds; Yields Dip to 3.47%" (3/17/26), "Northern Trust A.M. Launches Tokenized Treasury Digital Enabled Shares" (3/3/26), "BNP Paribas Debuts Tokenized MMF" (2/23/26), "Western Adds Tokenized MMF Class" (1/14/26), "Boston Fed Paper Examines Vulnerabilities of MM ETFs, Tokenized MMFs" (1/7/26), "More from Irish Funds' Tokenization Paper; Decrypt Explains Stablecoins" (12/29/25), "JPMAM Liquidity Insight: Tokenization Transforming Money Market Funds" (12/24/25), "Amundi Tokenises Shares of EUR MMF" (12/22/25), "JP Morgan Launches Tokenized MMF, My OnChain Net Yield Fund (MONY)" (12/17/25), "Bank for International Settlements Primer on Tokenized Money Funds" (12/2/25), "TD Securities Writes on Stablecoins, Tokenized Money Funds, Digital" (11/5/25), "NY Fed Blog Says Money Funds Dominate Tokenization To Date; Stability?" (9/25/25), "IMMFA on Tokenization of MMFs in Europe; Tether USDT; Fidelity Digital" (9/22/25), and "BNY's LiquidityDirect Portal Announces Plans to Tokenize Money Funds" (7/24/25).
