BNY launches money market fund to hold reserves for US stablecoin issuers

BNY Mellon introduces a money market fund for stablecoin reserves

Global financial institution BNY Mellon has launched a new money market fund aimed at holding reserves specifically for US stablecoin issuers. This initiative comes as part of the bank's strategy to support the evolving landscape of digital finance, which is increasingly reliant on stablecoins. The fund is now available to US stablecoin issuers and other qualified institutional investors involved in fiduciary, agency, advisory, brokerage, or custodial roles.

Fund aligns with the GENIUS Act for stablecoin regulation

This money market fund is designed to comply with the GENIUS Act, a significant piece of legislation enacted in July 2025 that establishes the first federal framework for US stablecoins. This act outlines the necessary standards for the backing assets of stablecoins, ensuring that they are supported by reliable reserves. Notably, the fund will not directly invest in stablecoins but will instead focus on maintaining cash reserves as mandated by the new regulations.

Investment strategy focuses on US Treasury securities and cash holdings

According to the fund's documents, the investment strategy will prioritize short-term US Treasury securities, overnight repurchase agreements backed by Treasurys or cash, and direct cash holdings. The fund aims to uphold a stable $1 share price, with at least 99.5% of its assets allocated to government-backed instruments. The shares of this fund are intended to serve as reserves for payment stablecoins, thus enhancing the overall stability and reliability of the stablecoin ecosystem.

Growing stablecoin market sees new entrants and innovations

The introduction of this fund coincides with a dynamic period in the stablecoin market. Following the passage of the GENIUS Act, the competition in this space has intensified. Current estimates indicate that the stablecoin market surpasses $305 billion, with projections suggesting it could reach $1.5 trillion by the decade's end. Major players like Tether’s USDt and Circle’s USDC dominate the market, but new entrants are rapidly emerging. For instance, World Liberty Financial recently launched USD1, a new stablecoin pegged to the US dollar, and MetaMask announced its own dollar-backed stablecoin, MetaMask USD (mUSD). Furthermore, efforts are underway in Europe to develop a euro-denominated stablecoin, demonstrating the global interest in the stablecoin segment.