Tokenization is steadily moving from concept to practical application in traditional finance, and its impact on money market funds could be significant. According to tokenization specialist Olivia Vande Woude, blockchain-based fund structures may reduce servicing costs by as much as 45% once the ecosystem fully matures.
“Does tokenization actually save money on a money market fund?”
It’s the most common question I get from institutional allocators. Here’s how I think about it. The short answer: traditional MMF servicing runs roughly 10 – 20 bps of AUM (drawn from “Other Expenses” disclosures in…
— Olivia Vande Woude (@cryptoreine) May 4, 2026
In a recent analysis, Vande Woude explained that tokenized money market funds could bring expenses down from the typical 10–20 basis points (bps) of assets under management (AUM) to roughly 5–12 bps. While that shift won’t happen overnight, it signals a meaningful long-term efficiency play for large asset managers navigating rising operational costs.
Where tokenization delivers the biggest savings
The most notable cost reductions are expected in transfer agency services. Traditionally accounting for 3–8 bps, this function could shrink to 1–3 bps in a tokenized model. Smart contracts effectively act as the shareholder register, reducing the transfer agent’s role to compliance-focused tasks such as whitelist management and regulatory coordination.
Another major efficiency driver lies in daily reconciliations. In the current system, multiple parties including fund administrators, custodians, and managers, maintain separate records that must be constantly aligned. Tokenization replaces this fragmented approach with a shared on-chain ledger, significantly cutting down time and costs associated with reconciliation.
Savings in fund administration are expected to be more modest, with costs potentially declining from 2–5 bps to 2–4 bps. Meanwhile, custody expenses are unlikely to change, as underlying assets like Treasuries will remain off-chain with traditional custodians. Audit, compliance, and legal costs may also see slight reductions due to improved transparency and real-time data verification.
Gradual gains, not overnight disruption
Despite the promising outlook, Vande Woude cautions that these estimates are still directional. Most tokenized funds today operate hybrid models, running blockchain systems alongside legacy infrastructure. This dual setup limits immediate cost savings.
The full benefits are expected to emerge over the next five to ten years as the industry phases out redundant systems and scales blockchain-native operations. For large funds, even incremental savings can be substantial, potentially reaching $7 million annually for a $10 billion fund and up to $70 million for a $100 billion fund.
Meanwhile, a recent analysis by RWA Foundation indicates that tokenization is entering a new phase, moving beyond initial adoption that focused on familiar financial instruments like equities, government bonds, funds, and real estate markets favored for their established demand and regulatory clarity into less accessible sectors.
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