Tokenising Money Market Funds: Ireland's Practical Path to Fund Innovation

This article was authored by the Money Market Fund Working Group. “Ireland's strength as a global funds centre lies in its ability to combine innovation with robust governance and investor protection. The digital twin approach to tokenisation builds on those foundations, offering a practical pathway to enhanced collateral mobility, operational efficiency and broader adoption of digital assets within the funds industry.”

Introduction: Ireland's Tokenised MMF Opportunity

Tokenised money market funds are increasingly being adopted as a pragmatic response to frictions in today’s collateral and liquidity management workflows. In stressed conditions, the need to redeem MMF holdings into cash in order to meet margin or funding demands can introduce avoidable settlement lag and operational complexity, and may amplify liquidity pressures. Tokenisation offers a route to mobilise MMF exposure more directly between eligible parties, supporting faster collateral movements while preserving the familiar risk profile and yield characteristics of regulated MMFs while reducing redemption and reinvestment risk for both shareholders and other market participants and removing fiat settlement lag.

This paper focuses on a “digital twin” approach to tokenising existing Irish MMFs. Under this model, the authoritative off-chain share register remains the definitive record of legal ownership and settlement finality, whilst an on-chain token layer provides a digitally verifiable representation of entitlements and a more automated transfer mechanism. As this paper will explain, the model can deliver a ‘best of both worlds’ outcome: the legal certainty associated with the off-chain register, combined with the operational efficiency, speed and programmability of token transfers.

MMFs are inherently scale-dependent products. They benefit from deep liquidity pools, diversification and operational efficiency. Tokenising existing MMFs offers a highly effective route to attracting investment. Investors can gain immediate access to an established fund platform and asset base whilst benefiting from the enhanced transferability and automation associated with tokenisation. This avoids fragmenting liquidity across multiple standalone tokenised vehicles and supports faster adoption by market participants.

Ireland benefits from commitment across industry, government and regulators to realise the opportunities associated with fund tokenisation.

The Irish Funds Project Springboard laid the analytical groundwork, the Central Bank of Ireland's Discussion Paper on DLT & Tokenisation in Financial Services in March 2026 opened a structured dialogue on enabling tokenisation within a proportionate regulatory framework and the Department of Finance’s Funds Sector 2030 review recommended developing a pathway to the adoption of tokenisation. The Ireland for Finance Vision 2030 strategy, published in August 2026, further commits the Government to supporting the development of tokenisation of investment funds.

1. The Case for Tokenising Existing MMFs

Tokenised money market funds have moved from concept to commercial reality in Ireland with the recent launch of three digital twin tokenised MMFs by Aviva Investors, BlackRock and Schroders.

By leveraging distributed ledger technology to tokenise interests in MMFs the landscape of collateral management can be transformed.

The impetus for this transformation is well documented. Many market participants use MMFs for cash management purposes and often need to post margin for their non-centrally cleared derivative transactions. To do so they often must redeem from the MMF and pass the cash to the counterparty. When the cash is received by the OTC counterparty, it may place that cash with an MMF or invest it directly in the short-term markets subject to the terms of the arrangement.

The systemic impact of collateral frictions became clear during the UK's LDI crisis in 2022, when sharp movements in gilt yields forced pension funds to redeem MMF holdings to source cash for margin calls, contributing to a negative spiral of falling prices, increasing collateral requirements and amplified liquidity demands. While tokenisation would not have altered the underlying market dynamics, tokenised MMFs may have enabled certain market participants to mobilise collateral more efficiently, potentially reducing some of the operational and market pressures associated with margin calls and the need to redeem fund holdings into cash. Tokenised versions of constant and low-volatility NAV MMFs could be transferred outside of the normal valuation cycles allowing market participants to maintain the yield, safety, and familiarity of MMFs with new levels of operational efficiency and real-time usability.

Ireland hosts more than 43% of MMFs in Europe. Project Springboard identified the hybrid or digital twin model as a transitional structure designed to enable real-time updates and automated processes while ensuring the off-chain register remains the definitive source of truth for legal ownership. This approach reflects the prevailing market reality: the vast majority of tokenised funds operational today incorporate some element of hybrid on-chain and off-chain functionality, layering DLT-based registers over existing fund administration systems rather than replacing them entirely. The digital twin model is therefore not a departure from existing fund infrastructure but an enhancement of it. By leveraging established transfer agency, fund administration and governance arrangements, the model supports innovation whilst preserving legal certainty, operational resilience and regulatory oversight.

2. Architecture of a Tokenised MMF Using a Digital Twin Model

In the digital twin model, the off-chain share register continues to be maintained by the transfer agent in accordance with the fund's constitutional documents and applicable legal and regulatory requirements and no change to the legal ownership of shares is effective until it is recorded on the off-chain register of members. The on-chain register records the issuance, holding and transfer of digital tokens, each corresponding on a one-to-one basis to a share on the off-chain register. The on-chain register does not itself confer legal title; it provides a digitally verifiable representation of entitlements recorded on the authoritative off-chain register.

The integration between the off-chain register and the tokenisation layer ensures that each register accurately reflects the other at all times. The tokenisation layer manages the lifecycle of tokens on the DLT platform and employs smart contracts to enforce transfer restrictions and automate compliance checks; for instance, to ensure that a token (and therefore a share) cannot be transferred to an investor who has not been AML-cleared and allow listed (or whitelisted) on the blockchain.

A key feature of the model is the notification of change mechanism, which enables the on-chain and off-chain registers to be kept in sync through event-driven updates. There is a limited number of events in an MMF (subscription, transfer, dividend re-investment and redemption) and each can be set up either (A) such that the off-chain share moves first (e.g. in a subscription, the share is issued first and then the token minted) or (B) the on-chain token moves first (e.g. in a transfer, the token moves between wallets and then the off-chain share register is updated to reflect the transfer). In either case, the corresponding register is updated to align: (A) an on-chain event is triggered to reflect the off-chain event (e.g. following the issuance of shares, the minting of tokens is instructed) or (B) the blockchain is monitored for on-chain events and, once one occurs, the off-chain register is amended accordingly (e.g. upon notification of a token transfer, the off-chain register is updated to reflect that transfer).

In the context of a transfer (which, as discussed below, is the key event in the context of the collateral use case), the smart contract is designed to ensure that a token can only be transferred to an investor who is already cleared to become a shareholder, with the result that once the token is transferred, the corresponding update to the off-chain register requires no further steps or action on the part of the investors – it can occur in real time on a 24/7 basis.

Because updates to the on-chain and off-chain registers can be integrated such that they are effectively in sync through event-driven updates, the result is a continuous reconciliation process in near real-time, with automated checks triggered by each transaction event to confirm that the corresponding entry has been recorded on both registers. A secondary control of periodic reconciliation (e.g. conducted at each valuation point) may involve a full comparison of all holdings across the on-chain and off-chain registers.

3. Collateral Eligibility

The collateral issue for MMFs

Although the EU margin requirements under EMIR permit the use of UCITS units as eligible collateral (subject to specified conditions), MMF shares are not consistently treated in practice as eligible collateral across the market for non-centrally cleared derivatives, reflecting conservative interpretations and divergent approaches to what constitutes ‘highly liquid’ and ‘low risk’ collateral. In particular, there remains a perceived lack of alignment between EMIR (highly liquid / low risk UCITS), e money safeguarding concepts (secure and low risk assets), MiFID’s framing of ‘qualifying’ MMFs (highest quality / lowest risk) and payment services safeguarding rules (secure, liquid and low risk assets).

How would tokenising solve for this?

Tokenisation does not itself determine whether an MMF is eligible collateral under applicable regulatory or contractual frameworks. Rather, it enhances the efficiency with which eligible collateral can be mobilised, transferred and verified. A DLT layer with permissioning applied at token, protocol or domain level, whether on a permissioned network or on a public ledger with institutional controls, can enable near real time, automated transfer features, resulting in faster transactions in shares. The ledger also allows identical data sets to be shared across various parties on a transparent and real-time basis, guaranteeing the integrity of data across participants and removing duplicative reconciliations.

The headline is that tokenisation can make collateral mobilisation operationally simpler and faster, which in turn supports receiving parties’ eligibility and risk assessments. Where implemented through a digital twin operating model, with a clearly defined contractual framework that links token movements to corresponding updates on the off chain register, backed by robust reconciliation and exception handling, market participants can achieve a ‘best of both worlds’ outcome: the legal certainty of ownership and settlement finality anchored in the off chain register, combined with the operational efficiency and speed of token transfers.

Where a tokenised transfer forms part of a purchase or a bilateral collateral exchange rather than a pledge, a recognised on-chain settlement asset, most practically a MiCAR-authorised e-money token, could be used by the parties to facilitate any cash payment required for atomic delivery-versus-payment, thereby eliminating unsecured exposure during the settlement window.

4. Conclusion: Why the Model Works Today

The digital twin model for Irish MMFs is operational today, across MMF types, across currencies and in both existing and newly established funds.

The architecture builds on the existing legal and operational framework for Irish MMFs. By preserving the off-chain register as the authoritative record of legal ownership, the digital twin model ensures that shares continue to be held on the same legal basis as traditional fund shares thereby sidestepping questions of ownership, settlement finality and enforceability that remain to be fully resolved for digitally native token holdings. The on-chain register and tokenisation layer are additive components, introduced as an operational enhancement rather than a structural replacement, enabling MMFs to offer tokenised share classes alongside traditional share classes within the same fund vehicle. Robust on-chain and off-chain reconciliation ensures that these two records remain synchronised, providing counterparties and regulators alike with confidence in the integrity of the ownership record.

The argument for collateral mobility is equally compelling and the digital twin model is well suited to this collateral use case.

The digital twin model offers the Irish MMF industry a pragmatic, low-risk entry point into tokenisation. It does not require market participants to abandon existing systems; it enhances them. By reducing operational friction associated with collateral mobilisation whilst preserving existing legal and regulatory protections, digital twin MMFs offer a practical bridge between traditional fund infrastructure and emerging digital market ecosystems.

By allowing tokenised MMF units to be issued, held, transferred, and used as collateral within today's legal and operational framework, Ireland is positioning itself as the jurisdiction that sets the standard for how traditional funds and digital infrastructure can coexist and mutually reinforce one another.