Ripple has announced a partnership with investment firms Archax and Abrdn to expand the adoption of tokenized money market funds to broader investors. The collaboration deal, announced on November 25, 2024, will see Archax and Abrdn offer access to their tokenized money market fund on the XRP blockchain.
Developing access to tokenized money market funds
The tokenized fund access establishes XRP as one of the major blockchains for decentralized market and RWA (real-world asset) tokenization. The development marks a crucial step towards creating settlement efficiencies and operational cost savings by integrating traditional financial infrastructure with the XRP protocol.
The entry of Archax/Abrdn tokenized money market fund on the XRP blockchain demonstrates how tokenization of real-world assets can improve operational efficiencies.
This partnership will see the digital funds provide investors with access to liquid, profit-making assets. XRP and Archax/Abrdn will allow their customers to hold and trade these digital assets using their institutional-grade technology solution.
The emergence of tokenized money market funds
Asset tokenization is witnessing rapid growth. The capability of transforming real-world assets into virtual assets on a blockchain has created new liquidity opportunities, making the technology crucial for investors.
Money market funds are among the latest traditional financial products to benefit from tokenization. The collaboration between Ripple and Archax/Abrdn is set to establish an important development towards allowing tokenization of traditional money market funds.
Investors are increasingly seeking how they can have control over their investments and decrease operational costs. The demand is what drives the growth of DeFi (decentralized finance). The deFi market is anticipated to reach $48.02 billion by 2031, with tokenized money market funds rising in popularity.
These funds are in increased demand because they have the potential to offer greater returns than stablecoins. In the past, investors preferred stablecoins to hedge against volatility risk in cryptocurrency portfolios.
However, stablecoins are known to have a limitation – offer minimal returns. Tokenized money market funds provide an attractive solution, allowing customers to maximize returns and mitigate risks in their investment pools.
These digital assets are produced through tokenization, a process that transforms traditional fund shares into virtual coins through the use of blockchain technology. Through this way, investors can trade tokenized funds 24/7 without facing restrictions by trading hours or regional limitations.
Lastly, these tokenized funds allow fractional ownership, enabling investors to purchase smaller amounts of shares. This reduces the entry barrier, thus giving both small and big investors to access the markets.
