By Kevin Loo, CEO Hong Kong, DigiFT
The Forecasting Problem
When the Federal Reserve held rates steady on 18 March, it was not, as some reported, a signal of confidence. The accompanying statement used the word “uncertain” to describe the implications of the Middle East conflict for the US economy—a formulation that, read carefully, admits as much as it conceals. The updated dot plot showed a median projection of one cut by year end; core PCE inflation was revised upward to 2.7%. The committee, in other words, does not know what comes next. Neither does anyone else.
This is not, in itself, unusual. What is unusual is the breadth of the uncertainty—tariffs repricing global supply chains, energy costs subject to geopolitical variables no model can reliably capture, and an inflation trajectory that has repeatedly defied consensus forecasts—and shows little sign of becoming more predictable. In such an environment, the question facing institutional allocators is not which asset class offers the best outlook. It is which one does not require them to have one.
The answer, perhaps counterintuitively, is the one most often dismissed as unambitious.
The Misread Instrument
Liquidity shares a quality with the conditions that make markets function: it is unremarkable when present and catastrophic when absent. Ask any investor who has been forced to liquidate at the wrong time. The experience is not one they repeat.
Let us be direct. In the current environment, the investor holding a well-structured money market position is not playing defense. They are holding the most strategically flexible instrument available—one that generates competitive yield, carries negligible duration risk, and preserves the full capacity to act when opportunity emerges.
That this requires stating at all is a consequence of history. In the decade of near-zero rates that followed the global financial crisis, cash was genuinely costly to hold. MMFs, which invest in short-term, high-quality instruments that track prevailing rates, yielded almost nothing when those rates were pinned to the floor. The pressure to deploy into longer-duration, higher-risk instruments was rational—the alternative was watching inflation quietly erode the real value of idle capital. The characterization of MMFs as the unambitious choice belonged to that era.
That era ended when rates rose. There is little in the current policy outlook to suggest it is coming back.
The Federal Reserve’s current target range of 3.50–3.75% means that ultra short-duration instruments will increasingly generate competitive income—without asking investors to take on the valuation risk embedded in assets with meaningful interest rate sensitivity. When rates rise, long-term bond prices fall, and those losses surface immediately in portfolio valuations. Money market instruments, by contrast, hold their value as rates move and their yields adjust upward with minimal lag. The investor in a money market fund does not need to be right about the direction of rates. They need only to be present.
Volatility compounds this advantage. Liquidity planning, not analytical failure, is what separates the forced seller from the investor who can afford to wait. A meaningful money market allocation is not a drag on portfolio construction. It is the mechanism by which an investor converts market dislocation from a threat into an opportunity
Volatility compounds this advantage. The forced seller—the investor who must liquidate positions at distressed prices to meet liquidity needs during a drawdown—is rarely a victim of bad analysis. They are a victim of insufficient liquidity planning. A meaningful money market allocation is not a drag on portfolio construction. It is the mechanism by which an investor converts market dislocation from a threat into an opportunity.
What Our Partners Are Telling Us
DigiFT works closely with some of the most active institutional participants in global capital markets. What follows reflects perspectives privately gathered from that network—not a house view, but an aggregate read of where sophisticated capital is moving and why.
The signal is unambiguous. Global money market fund assets reached an all-time high last week, surpassing US$8 trillion. This is not a retail phenomenon. Institutional capital, in aggregate, is moving toward liquidity—not out of panic, but out of a considered recognition that in an environment of genuine uncertainty, optionality carries a premium that conventional yield metrics do not capture.
APAC remains an outlier. Inflows into the region have not yet moved in sympathy with global trends, though our partners expect that to change as the implications of the current macro environment become harder to defer. The institutions that have already positioned will not necessarily have timed the market correctly. They will simply have had the discipline to act before the window narrowed.
Chair Powell, at his March press conference, noted it is “too soon to know the scope and duration” of the pressures now bearing on the economy. That is not reassurance. It is an acknowledgement that the conditions underpinning money market returns—elevated rates, persistent inflation—are unlikely to resolve quickly. For patient capital, that is a signal worth heeding.
The signal from Web3 infrastructure points in the same direction. DeFi yields have compressed sharply from cycle highs—on-chain stablecoin lending has stagnated, reflecting a broader absence of conviction in crypto markets that most expect to persist until the next meaningful wave of protocol innovation arrives. Proposed regulatory changes to yield-bearing stablecoins in the United States may accelerate the reallocation from stablecoin-denominated strategies toward yield-bearing money market instruments. Vault curators and on-chain treasury managers are increasingly turning to tokenised real-world assets as a source of stable, natural yield—a shift driven as much by the limitations of native DeFi returns as by the improving quality of on-chain institutional infrastructure. The convergence of institutional and crypto-native capital toward the same instrument is not coincidental. It is a structural shift.
The On-Chain Difference
Conventional money market instruments, for all their merits, carry the operational constraints of the infrastructure they run on—settlement cycles measured in days, custody arrangements that add friction to redeployment, and limited composability with the digital asset infrastructure that an increasing share of institutional capital now touches. Whether these constraints matter depends entirely on how quickly an investor needs to move.
In a period of rapid, round-the-clock market movement, they matter considerably. Recent geopolitical escalations have repeatedly surfaced over weekends—when traditional markets are closed and institutional investors have limited options to respond. On-chain infrastructure changes that calculus. Capital that is already positioned in tokenised instruments can be redeployed at any hour, without waiting for Monday’s open.
DigiFT operates as a distributor of institutional-grade tokenised products, working with asset managers including UBS Asset Management, CMBI, and Taikang, among others. The on-chain delivery model these products share is best illustrated by examining how one has been structured in practice. In November 2024, UBS Asset Management launched its first tokenised investment fund—a product built on Ethereum, underpinned by high-quality money market instruments within a conservative, risk-managed framework, and made available through authorized distribution partners. It was the product of a multi-year program of live tokenization execution conducted in partnership with regulators. What it demonstrated is what on-chain delivery actually changes: same-day settlement within fund operating hours; capital that can be transferred and restructured without the friction of conventional custody and clearing; and instant redemption capability that extends liquidity access beyond the hours of traditional markets. That last point is not a convenience feature. It is a risk management capability.
The provenance matters as much as the mechanics. This is not a fintech-native product built to approximate institutional quality. It is an institutional product, from one of the world’s largest asset managers, delivered through regulated infrastructure, on a public blockchain. That combination—institutional rigor, on-chain efficiency, regulatory credibility—is not yet common. It will become the standard. The question is not whether to engage with this infrastructure. It is when.
The Position for Whatever Comes Next
The breadth of current uncertainty—geopolitical, inflationary, and monetary—is not a temporary condition to be waited out. It is the environment in which capital allocation decisions must now be made. The question is not when clarity will return. It is how to perform in its absence.
The asymmetry of the on-chain money market position is worth stating plainly. In my view, the calculus is straightforward.
If uncertainty persists—if tariffs continue to complicate the inflation picture, if energy costs remain elevated, if the Fed holds through the second half of the year—then on-chain money market exposure continues to generate competitive yield, with full liquidity and negligible duration risk. The investor who has positioned here loses nothing by having moved early.
If uncertainty resolves—if a credible de-escalation emerges, if inflation prints begin to surprise to the downside, if the Fed moves sooner than the dot plot suggests—then the same investor is positioned to redeploy, same-day, into whatever opportunity that resolution creates. They have not missed the move. They have been waiting for it, at yield, in the most liquid instrument available.
There are positions that look correct only in hindsight. This is not one of them. In the current environment, on-chain money market allocation is not the cautious choice. It is simply the most defensible one on the table
Institutional allocators who would like to explore how on-chain money market exposure can be structured within their existing portfolio framework are welcome to reach out to the DigiFT team.
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