Fidelity joins Wall Street's race to manage stablecoin reserves

Fidelity Investments is the latest Wall Street firm seeking a role in one of the fastest-growing corners of digital assets: managing the reserves that back stablecoins.

The asset manager is launching the Fidelity Reserves Digital Fund, a money market fund designed for stablecoin issuers and institutional investors under the reserve requirements established by the recently enacted GENIUS Act, on Thursday.

The launch comes just days after State Street unveiled a similar product, the State Street Stablecoin Reserves Money Market Fund, underscoring how traditional financial firms are increasingly competing for a market that could swell into the trillions of dollars if stablecoins become a larger part of the global financial system.

Stablecoins — digital tokens pegged to assets such as the U.S. dollar — have grown into a roughly $320 billion market and are widely used for trading, payments and cross-border transfers. Industry forecasts cited by State Street project the sector could expand to between $1.9 trillion and $4 trillion by 2030 as institutional adoption increases.

That growth would create a corresponding pool of reserve assets that must be invested in highly liquid instruments.

The GENIUS Act, signed into law last year, established the first federal framework for payment stablecoins in the United States. Among other requirements, issuers must hold reserves in cash, short-term Treasury securities and certain government money market funds.

The legislation has created an opportunity for traditional asset managers to offer regulated vehicles that stablecoin issuers can use to manage those reserves while generating yield.

Fidelity's fund will invest in U.S. Treasury bills, notes and bonds with maturities of 93 days or less, cash, overnight repurchase agreements backed by Treasuries and other government money market funds that comply with the law.

"Fidelity has a longstanding history in fixed income and money markets, making us uniquely positioned to offer a money market fund for stablecoin issuers that is compliant with the new GENIUS-Act legislation," said Robin Foley, Fidelity's head of fixed income, in a statement.

While Fidelity's announcement focused on reserve management, State Street framed its launch as part of a broader push into tokenized finance through partnerships with crypto firms such as Anchorage Digital and products designed for onchain liquidity management.