DFC

The Bank for International Settlements (BIS) published an article on the fast-growing markets for tokenized money market funds (TMMFs). TMMFs operate as tokenized representations of money market fund shares on public permissionless blockchains. They function both as collateral and as savings vehicles, offering money market yields and regulatory protections of securities, unlike stablecoins, which do not pay interest. Primarily used in decentralized finance (DeFi), TMMFs enforce regulatory compliance through the "allow-listing" of blockchain wallets, limiting direct peer-to-peer trading to pre-approved participants, though this mechanism does not prevent all forms of secondary trading. While TMMFs aim to improve on stablecoins by providing yield and programmability, they also introduce risks, such as liquidity mismatches, as well as the operational and anti-money laundering / countering the financing of terrorism-related risks associated with stablecoins. [Source: BIS]

The NY Fed published an article that examines the potential role of permissionless blockchains in future payment infrastructures, focusing on how stablecoins leverage global, peer-to-peer transfer networks for accessibility and borderless payments. While stablecoin transaction volumes have skyrocketed, automated activity and bot transactions dominate, so true payment adoption still lags. The piece contrasts stablecoins’ borderless nature with faster payments systems like FedNow, noting that existing solutions remain reliant on bank accounts and thus exclude unbanked users and impede international transfers. Permissionless blockchains offer universal access, programmability, and composability, but face hurdles around regulation, security, privacy, and scalability. Despite growing regulatory clarity, mainstream adoption rests on balancing user control, societal safety, and functional integration with the financial system, as the public pivots from legacy account-based money toward digital, peer-to-peer transfers in practice.​ [Source: NY Fed]

In an interview with the Financial Times (FT) the chair of the Basel Committee on Banking Supervision, Erik Thedéen, has called for a reworking of global crypto rules for banks after the US and UK refused to adopt requirements imposing a 1,250% risk weighting on stablecoins and other digital assets that used permissionless blockchains. Thedéen noted that the sharp rise in stablecoin usage and differing regulatory stances have made it difficult to achieve consensus, prompting calls for a new approach. While the current Basel rules, originally focused on assets like bitcoin, would subject many stablecoins to the harshest capital requirements, major regulators such as the US Federal Reserve and the Bank of England have decided not to implement them in full. [Source: FT]

Stablecoin Performance in Cross-Border The Stanford University Future of Digital Currency Initiative (FDCI) published a paper that examines the performance of dollar-based stablecoins in cross-border payments using a dataset of over 41 million transactions from Airtm, a digital dollar wallet platform, spanning May 2019 to May 2024. The analysis benchmarks transaction speed and cost against G20 Roadmap targets for enhancing cross-border payments. The findings indicate that stablecoins demonstrate substantial advantages in speed, with more than 96% of transactions settling within one hour, significantly exceeding the G20's 75% target. Cost performance is more variable: approximately 51% of transactions meet the 3% fee target for remittances and 36.7% meet the 1% target for retail payments, though fees remain elevated for certain transaction types, particularly peer-to-peer marketplace on- and off-ramps. The study also highlights that stablecoins enable previously uneconomical use cases, with nearly half of enterprise disbursements being micropayments under $2. [Stanford FDCI]