Bank of America: Tokenization May Outpace Stablecoin Impact on Treasury Bill Market
Bank of America’s (NYSE: BAC) rates strategy team said the U.S. Treasury market is increasingly influenced by two developing trends: rising stablecoin demand for Treasury bills and the tokenization of debt-related assets.
In a report published Monday, the Wall Street bank noted that while stablecoins are a growing source of demand for short-term government debt, their impact is likely to be more disruptive to money market mutual funds (MMFs) than to Treasuries themselves.
BofA expects stablecoin purchases of T-bills to grow gradually, reaching between $25 billion and $75 billion over the next year. However, this scale of demand is not projected to significantly alter overall Treasury bill market dynamics.
Stablecoins—digital tokens pegged to traditional assets like the U.S. dollar or gold—play a central role in cryptocurrency markets by providing liquidity, payments infrastructure, and international transfer capabilities. Their emergence as buyers of Treasuries has drawn increasing attention from traditional finance.
Largest treasury holders as of July 30 (Source: Messari)
Tokenization Seen as a Defensive Response
BofA’s analysts also pointed to tokenization as a growing trend within the financial sector, particularly among money market funds seeking to maintain competitiveness. Some MMF clients, the bank said, are showing heightened interest in tokenization as a defensive response to the rise of stablecoins.
In July, BNY Mellon (NYSE: BK), in partnership with Goldman Sachs (NYSE: GS), introduced blockchain-based technology to record ownership of select MMF shares. The initiative, driven partly by stablecoin growth and the newly enacted GENIUS Act, marked the first-ever rollout of tokenized MMF shares.
With stablecoins currently restricted from offering yield, MMFs see tokenization as an opportunity to offer competitive rates and retain investor interest. BofA warned, however, that this advantage could narrow if regulations evolve or if stablecoin issuers find ways to pay returns to holders.
A Shifting Market Structure
The report underscores a broader transformation underway in U.S. financial markets, where traditional instruments like Treasuries and MMFs are increasingly intersecting with digital asset infrastructure.
While stablecoin demand for government debt may not yet be strong enough to reshape the T-bill market, its steady rise—combined with tokenization initiatives—signals that digital assets are no longer operating at the margins of traditional finance but are becoming embedded within it.
