America’s First Bank-Backed Stablecoin Fund Changes and Everything

BNY Mellon has launched the BNY Dreyfus Stablecoin Reserves Fund, which is a government-backed money market fund designed for the one-to-one liquid assets mandated by the U.S. GENIUS Act for payment stablecoins. This service aims at the stablecoin marketplace and qualified institutional participants as the regulated gateway to reserves. This announcement was made when the U.S. GENIUS Act was signed into law in the United States this year, requiring clear, highly liquid reserves for stablecoins each month.This regulatory clarity has significance given the stablecoin’s position at the intersection of technology and finance. The GENIUS Act, in this respect, resolves the unclear regulatory issue in favor of a rigid regulatory regime where the stablecoin issuers are compelled to maintain reserve assets in a clear, liquid, and segregated manner. BNY’s fund, in this case, provides a tangible, bank-level safe haven for the stablecoins’ reserve assets.On the market side, the presence of the big banking infrastructure for reserves represents a positive movement from the experimentative crypto infrastructure to finance. If the oldest custodians and asset managers cease to view crypto as niche, then the flows will soon follow. Already, analysts foresee a much bigger adoption rate for dollar-pegged stablecoins in the presence of a set of clear rules.The BNY Dreyfus Stablecoin Reserves Fund is a government money-market fund. This means that, rather than investing in hard-to-value assets, it holds extremely liquid, short-term government debt. These are exactly the kind of assets that are permitted to back payment stablecoins under the GENIUS Act, as it requires immediate convertibility to the U.S. dollar as well as audit trails. Another important clarification: the fund itself does not, in reality, purchase stablecoins. This is a regulated bucket for the backing assets of stablecoin issuers.Envision the U.S. issuer waking up to this decision. The regulators are requiring one-to-one support, monthly disclosure, and reserve segregation. The U.S. issuer moves the day’s support money into BNY’s money market fund, which provides economies of scale, audit quality, and banking services. The compliance departments can sleep better, the auditors can close their checklists faster, and the markets regard the asset as more reliable. This is not just hypothetical, as Anchorage Digital has offered signs of investment commitment to the fund.

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