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Original Title: ‘The Great Migration of Stablecoin Reserves: Wall Street\u2019s \u201cCompliance\u201d Devouring Crypto Balance Sheets’
Author: Sanqing, Foresight News<\/p><\/blockquote>\nOver the past week, several Wall Street institutions have almost simultaneously advanced their tokenized money market fund initiatives.<\/p>\n
On May 12, JPMorgan announced the launch of its second tokenized money market fund, JLTXX, on Ethereum; on the same day, Kraken\u2019s parent company Payward signed a strategic cooperation agreement with Franklin Templeton to integrate the BENJI series of tokenized funds into the Kraken platform, serving as institutional collateral and cash management tools.<\/p>\n
Not long before, Blackrock submitted applications for two additional tokenized funds to the SEC, further deepening its collaboration with Securitize. This series of actions reflects that regulatory expectations are rapidly driving institutional supply-side deployment.<\/p>\n
Wall Street\u2019s pincer movement, from custody backend to front-end collateral<\/h3>\n
In response to the same regulatory directive, Wall Street giants have revealed their ambitions to absorb crypto liquidity from different angles.<\/p>\n
\u201cThe King of Scale,\u201d Blackrock, by rejoining forces with its long-term partner Securitize, filed two new applications at once: one is the \u201cpure-blood\u201d tool BRSRV, specifically designed to meet the requirements of the GENIUS Act, with investment scope strictly limited to short-term bonds within 93 days; the other is the tokenization of its existing approximately $7 billion government money market fund, launching tokenized shares BSTBL.<\/p>\n
Given that it already manages around $65 billion in reserves for Circle, Blackrock is attempting to fully tokenize its vast traditional stablecoin custody business, relegating native issuers to mere \u201cdistributors\u201d responsible only for front-end issuance.<\/p>\n
JPMorgan followed closely with the launch of JLTXX (on-chain liquidity token fund), a product running on its own Kinexys (formerly Onyx) platform, with its debut on Ethereum. The prospectus explicitly states that it aims to meet the reserve needs of stablecoin issuers.<\/p>\n
JPMorgan is focusing on the future trajectory of banking. With the GENIUS Act paving a clear path for banks to issue stablecoins, JLTXX is essentially preparing in advance, aiming to become the default clearing and reserve backend when future GSIBs (Global Systemically Important Banks) enter the stablecoin issuance arena.<\/p>\n
In contrast, the partnership between Franklin Templeton and crypto exchange Kraken goes beyond the pure reserve mindset of the former two, intending to bridge retail and collateral. The core of their collaboration lies in integrating BENJI (tokenized money market funds) into Kraken as collateral for institutional trading and a cash management tool.<\/p>\n
Given that the future CLARITY Act may prohibit stablecoins from directly paying interest, tokenized assets like BENJI, which can generate returns and serve as underlying collateral, combined with Kraken\u2019s trading platform and customer base such as xStocks, cleverly bypass the income prohibition on stablecoins. The hand of traditional asset management has directly reached the collateral layer of Crypto-native trading.<\/p>\n
Additionally, during the same period, Morgan Stanley also launched the MSNXX fund, which meets compliant reserve requirements but does not adopt any on-chain settlement technology. Within the same compliance framework, whether or not to go on-chain has become a watershed for differentiation among giants. Simply meeting compliance is insufficient; the round-the-clock liquidity and asset composability brought by on-chain settlement are the true moats for the next generation of dollar reserves.<\/p>\n
The GENIUS Act delineates a market segment.<\/h3>\n
On July 18, 2025, U.S. President Trump signed the GENIUS Act. Article 4 of the bill provides a concise but clearly defined list of ‘eligible reserve assets’: balances in Federal Reserve accounts, insured deposits, U.S. Treasuries with remaining or original maturities not exceeding 93 days, overnight repurchase agreements collateralized by U.S. Treasuries, and government money market funds that invest solely in the aforementioned assets.<\/p>\n
For every dollar of stablecoin issued, it must be backed 1:1 by the above assets, and no interest or returns may be paid to holders. The rules are simple, but they establish a clear product boundary around ‘eligible reserves.’<\/p>\n
Last June, Treasury Secretary Bessent told the Senate Appropriations Subcommittee that a $2 trillion figure for the stablecoin market was ‘a very reasonable number.’ Citi’s forecast is $1.9 trillion in the base scenario by 2030 and $4 trillion in the optimistic scenario; Standard Chartered estimates that tokenized money market funds alone will reach $750 billion by then. Even conservatively speaking, the compliance threshold of ‘eligible reserves’ has already framed a demand pool worth trillions of dollars.<\/p>\n
The implementation rules of the GENIUS Act must be finalized by July 18, 2026, with the bill taking full effect no later than January 18, 2027. Regulatory bodies such as the OCC and FDIC are actively advancing rule-making. Supply-side players cannot afford to wait until then to act.<\/p>\n
The CLARITY Act is another piece of the puzzle.<\/h3>\n
The U.S. Senate Banking Committee is scheduled to conduct a markup session on the CLARITY Act on May 14. This bill complements the GENIUS Act, which regulates stablecoin issuance, while the CLARITY Act defines the market structure for digital assets and delineates the jurisdictional boundaries of the SEC and CFTC.<\/p>\n
There is a key interface between the two acts. The GENIUS Act prohibits stablecoins from paying interest to holders, while the draft text of the CLARITY Act differentiates between business incentives and passive income, also leaving some room for revenue generation for non-stablecoin tokenized assets.<\/p>\n
This regulatory firewall has positioned tokenized money market funds like BENJI as on-chain yield-generating cash management tools outside the scope of stablecoins. Not being stablecoins, they are not subject to the income prohibition but can still settle in real-time, serve as collateral, and be transferred around the clock. Kraken\u2019s integration of BENJI is built precisely upon this gap in the regulatory framework.<\/p>\n
Whether the CLARITY Act can proceed as planned will also determine the integrity of this commercial framework.<\/p>\n<\/div>\n