BNP Paribas, France's second-largest bank, is leveraging the Ethereum blockchain for a pilot project to tokenize money market funds (MMFs). This is significant, as it marks the first time a major European commercial bank has experimented with moving traditional short-term financial products onto the blockchain.
According to foreign news outlet The Block, tokenized MMFs will be issued through BNP Paribas Asset Management's "Asset Foundry" platform. While the public blockchain Ethereum is utilized in this process, access is restricted to a permissioned model. In other words, issuance and transfer occur on-chain, but holding and trading are restricted to eligible participants who meet relevant regulations.
Money market funds (MMFs) are a representative cash product that invests in stable short-term assets such as ultra-short-term government bonds and commercial paper (CP). Recently, the global asset management industry has been increasingly attempting to tokenize short-term bond products, including MMFs, to leverage blockchain-based efficiencies such as 24-hour settlement, real-time clearing, and automated collateral management.
BNP Paribas's decision signals two things. First, major European banks are beginning to "use" public blockchains in a controlled manner, rather than "excluding" them. This approach of building a permissioned layer on top of Ethereum, rather than a fully private chain, is seen as a compromise that simultaneously pursues openness and regulatory compliance.
Second, traditional financial products like money market funds (MMFs) are moving into direct competition with stablecoins and tokenized government bonds. In the US, tokenized government bonds and blockchain-based MMFs are rapidly growing, establishing themselves as reserve assets for stablecoins and as a means of institutional liquidity management. Major European banks are responding by issuing on-chain funds through their own platforms, a strategic move aimed at maintaining their leadership in the capital market.
In particular, the structure where asset management companies directly issue tokens and only qualified investors participate has the potential to become a model for the future institutional-only digital asset market. While this represents a different path from fully open DeFi, it is considered a realistic path for large-scale institutional capital inflow.
This pilot project holds significant symbolic significance, as it demonstrates that tokenization is no longer confined to startup experiments but is expanding into the MMFs of European megabanks. It remains to be seen whether this will mark a turning point for the on-chain asset market, evolving from a stablecoin-centric "payment rail" to an "investment infrastructure" centered on traditional financial products.
