BNY’s New Fund Pushes for Safer Stablecoin Reserves

The Bank of NY Mellon Corporation’s (BNY) new money market fund, which launched last Thursday, Nov. 13, may provide greater safety for stablecoin reserves but does not eliminate all operational and structural risks, experts say.

The fund, called the BNY Dreyfus Stablecoin Reserves Fund (BSRXX), is designed to hold reserves for stablecoins issued under the GENIUS Act, with Anchorage Digital providing the initial investment. While it does not invest in stablecoins itself, the fund offers a regulated place for issuers to park their cash.

The move reflects a broader trend of traditional financial institutions like Visa and Mastercard pushing deeper into digital assets – especially stablecoins, which have recorded massive growth this year alone. Currently, the stablecoin sector has a market cap of over $305 billion, up sharply from $206 billion in January.

More specifically, experts say BNY’s fund could make it easier for issuers to meet regulatory requirements and provide more clarity to investors post-GENIUS, which was signed into law in July by President Donald Trump. However, while the fund helps with compliance, stablecoins still face risks from relying on a single fund.

Compliant Solution for Stablecoin Reserves

According to Maja Vujinovic, CEO and co-founder of Digital Assets at FG Nexus, the new fund provides issuers with a safer, standardized place to hold the cash backing their tokens.

Vujinovic noted that one of the biggest problems in the past was that each issuer handled reserves differently, creating confusion and trust issues. A regulated money-market structure, she told The Defiant, is designed to solve that.

“It doesn’t necessarily pay more; in fact, yields may be a bit lower because the fund is limited to the safest assets,” she said. “But the trade-off is clearer rules, better oversight, and a big institution handling the reserves. That’s why issuers may choose it: it makes compliance easier and boosts credibility.”

However, Vujinovic emphasized that the setup doesn’t eliminate risk completely. Because BSRXX is a money-market fund and not insured by the FDIC, this means it can lose value. Still, in her view, the fund makes reserve management more transparent and professional.

“Overall, this is less about returns and more about creating reliable plumbing so stablecoins can scale safely in the mainstream financial system,” she added.

Ryne Saxe, co-founder and CEO of Eco, echoed Vujinovic’s points and noted that the move could reduce the heavy operational lift that most issuers face today.

“Today, most stablecoin issuers default to the same accepted collateral model — backing issuance with short-term, highly liquid securities that are effectively dollar equivalent and pay some yield,” he said. ”But that means they all have overhead managing that collateral, and it’s a lot of redundant effort.”

Structural Risks

However, not all experts are convinced the fund is a major innovation. For example, Maghnus Mareneck, co-founder and co-CEO of Cosmos Labs, said that while BNY’s fund may help solve the compliant custody problem, it’s table stakes and not a competitive advantage.

He added that stablecoin issuers still face margin compression from fees (10-50 basis points), jurisdictional fragmentation beyond the U.S., and the fact that traditional money market fund structures aren’t programmable.

“I want to see these funds go further – and enable money features such as conditional transfers or native interoperability,” Mareneck said. “The real differentiation here will come from infrastructure ownership: protocol-level compliance across jurisdictions, native interoperability, and the ability for partners to build on top of your stablecoin platform.”

He added that BNY would have this if they built their own Layer 1 blockchain, but until then, stablecoin issuers using the BNY fund face “counterparty risk.”

“BNY is the sole intermediary, which could lead to redemption timing mismatches during stress,” Mareneck explained. “Users have no direct reserve claim; instead, they are exposed to both issuer and BNY fund performance, with the stablecoins’ peg stability dependent on withdrawal speed, rather than cryptographic proof.”

Sid Sridhar, founder and CEO of BIMA Labs, echoed the risks from relying on a single fund, noting that in this scenario, a stablecoin takes on that fund’s liquidity limitations and constraints.

“If [the] redemption windows widen, if underlying assets get stressed, or if regulators impose new reporting rules, the stablecoin behaves less like crypto cash and more like a money market share,” Sridhar said. “That breaks the core product promise.”

He concluded that users don’t care about “brand names,” they care about instantly redeemable dollars that behave the same way 24/7.

“If a stablecoin backed by the BNY product can maintain that standard, it will compete,” he added. “If it cannot, the market will treat it as a slower, more permissioned version of what already exists, and liquidity will migrate toward more operationally agile models.”

The move comes a few months after BNY, alongside Goldman Sachs, unveiled a tokenized Money Market Fund (MMF) initiative aimed at bridging the gap between blockchain technology and traditional finance (TradFi).

The initiative develops digital “mirror” tokens of MMF shares using Goldman Sachs’ GS DAP, which is a permissioned blockchain platform only accessible by authorized participants.