Invesco Targets Stablecoin Reserves With New Tokenized Money Market Fund

Invesco, one of the world’s largest asset managers with over $1.7 trillion in assets under management, is making a bold play for the stablecoin market. The firm is launching a tokenized money market fund designed to serve as collateral for stablecoin issuers — directly competing with BlackRock’s BUIDL fund and Franklin Templeton’s BENJI token. The move signals that traditional finance giants are now racing to capture the lucrative business of backing digital dollars.

Here’s the kicker: stablecoin issuers like Tether and Circle need to hold high-quality, liquid assets to back their tokens. Tokenized Treasury funds are the perfect vehicle — they offer yield, daily liquidity, and are built on blockchains where stablecoins live. Invesco wants a piece of that action.

The Tokenized Treasury Gold Rush

The tokenized money market fund space has exploded in 2024. According to data from rwa.xyz, the total value locked in tokenized Treasury products has surged past $3 billion, up from just a few hundred million a year ago. BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) dominates with over $500 million, but competitors are piling in. Franklin Templeton, Ondo Finance, and now Invesco are all vying for stablecoin issuer Treasury mandates.

Invesco’s new fund, to be launched on a public blockchain (likely Ethereum or a layer-2), will invest in short-term U.S. Treasuries and repurchase agreements. The fund shares will be tokenized, allowing stablecoin treasurers to mint and redeem seamlessly. A source familiar with the plan told BullpenBrief the fund targets a yield competitive with existing tokenized Treasuries, currently around 5% annualized.

“Stablecoin reserves are a multi-billion dollar market that’s been dominated by a few players,” said Michael Chen, digital assets strategist at crypto advisory firm HashBridge Capital. “Invesco entering the space brings massive credibility and will force incumbents to lower fees and improve infrastructure.”

The timing is no accident. Stablecoin market cap has rebounded to over $170 billion, with Tether (USDT) and Circle’s USDC commanding the majority. Regulatory clarity in the U.S. — notably the proposed stablecoin bill — requires that reserves be held in liquid, safe assets. Tokenized money market funds are tailor-made for this, offering real-time transparency and automatic settlement.

How Invesco’s Fund Will Work

Details are still emerging, but the fund will likely use a similar structure to BlackRock’s BUIDL: a traditional money market fund whose shares are represented by an ERC-20 token on Ethereum. Investors buy the token with USD or stablecoins; the fund manager purchases Treasuries; the token accrues yield daily; holders can redeem 1:1 for USD at any time. The key difference? Invesco plans to integrate the fund directly with stablecoin protocols, allowing automated rebalancing.

“We’re seeing a convergence of TradFi and DeFi,” explained Sarah Patel, head of research at blockchain analytics firm ChainMetrics. “A tokenized money market fund is the bridge. It gives stablecoin issuers a regulated, audited product that their users can trust — and it opens up a new revenue stream for asset managers.”

Invesco’s move also comes amid a broader push by the firm to embrace digital assets. In January, Invesco partnered with Galaxy Digital to launch a spot Bitcoin ETF. The tokenized fund is the next logical step: using blockchain to distribute traditional products more efficiently.

But competition is fierce. Franklin Templeton’s BENJI token has been operating since 2021 and already supports USDC and USDT. Ondo Finance’s USDY offers similar yields through a decentralized structure. And BlackRock’s distribution network is unmatched. Invesco will need to differentiate — likely through lower fees or exclusive partnerships with major stablecoin issuers.

Meanwhile, geopolitical tensions continue to roil markets. President Trump has threatened a 100% tariff on Europe over digital taxes, a move that could disrupt cross-border stablecoin flows. Tokenized Treasury funds might actually benefit from such uncertainty, as investors flee riskier assets into dollar-backed instruments.

What This Means for Stablecoin Issuers and DeFi

For stablecoin issuers, tokenized money market funds solve a persistent headache: managing reserves across different wallets and protocols. Instead of holding Treasuries directly (which requires custodians and settlement delays), they can hold a single token that represents a diversified pool. That token can also be used as collateral in DeFi lending, minting synthetic dollars, or earning yield in liquidity pools — all while staying fully backed by short-term government debt.

This creates a virtuous cycle: more demand for tokenized Treasuries drives lower costs and better yields for stablecoin issuers, which in turn makes stablecoins more resilient. Analysts estimate that if just 20% of Tether’s reserves moved into tokenized funds, it would add $16 billion to the sector overnight.

But there are risks. Tokenized funds rely on smart contracts and blockchain infrastructure — a vulnerability that hasn’t gone unnoticed. In 2023, a bug in a popular tokenization protocol led to a brief de-pegging of a synthetic dollar. Regulators are also paying close attention. The SEC‘s stance on tokenized securities remains uncertain, though recent comments suggest a willingness to allow them under existing framework.

“The key question is whether these funds will be treated as securities under U.S. law,” said Patel. “If yes, they may need to comply with investor accreditation rules, which would limit their appeal to stablecoin treasurers. Invesco likely has the legal firepower to navigate that.”

Invesco’s fund is expected to go live later this year. If successful, it could set a template for other asset managers — and deepen the integration between the $27 trillion money market industry and the $170 billion stablecoin economy.

Disclosure: The author holds no positions in any digital asset mentioned.