Author
WisdomTree
Summary
This proposal seeks to introduce the WisdomTree Government Money Market Digital Fund (“WTGXX” or “Fund”) as an on-chain, reserve (backing) asset for Frax USD with exposure to U.S. dollar yield.
WTGXX is a tokenized money market digital fund, regulated under the U.S. Investment Company Act of 1940 (“1940 Act”), designed to provide investors with a high level of current income consistent with preservation of capital and liquidity and the maintenance of a stable $1.00 net asset value (“NAV”) per share. The securities purchased by the Fund are subject to the quality, diversification, and other requirements of Rule 2a-7 under the1940 Act, and other rules adopted by the Securities and Exchange Commission (the “SEC”). This product can be utilized by crypto-native institutions and investors to support the reserves of stable assets.
Benefits of utilizing WTGXX as a reserve backing asset:
- Competitive Yield via U.S. Treasury and government securities exposure
- U.S. Regulatory Compliance, Transparency, and Standardization
- 1940-Act Fund Structure and Bankruptcy Remoteness
- Liquidity and Redemption Efficiency and Optionality (primary market mint/redeem and peer-to-peer transactions)
- Institutional-grade investment platform
- Partnering with industry leaders – including Voya Investment Management, Fireblocks, and Bank of New York
Background and Motivation
WTGXX launched in November 2023 as one of the first tokenized government money market funds tailored for the digital finance ecosystem available to both retail and institutional investors. WTGXX is a tokenized U.S. government money market fund designed to bring yield-generating, compliant, and highly liquid U.S. Treasury and government securities exposure to crypto-native institutions. In addition, the Fund is structured through a statutory trust, WisdomTree Digital Trust, and subject to the 1940 Act and the protections it brings to shareholders. As a SEC-regulated 2a-7 fund, WTGXX seeks to meet the highest standards for transparency, asset liquidity, and risk management, offering a trusted alternative to fiat reserves while enabling on-chain composability.
For Frax, WTGXX provides multiple integration pathways to enhance collateral efficiency. The Fund supports unlimited primary market minting and redemptions while enabling permissioned peer-to-peer transfers, unlocking decentralized liquidity provisioning. As an ERC-20 token, WTGXX is EVM compatible with DeFi protocols and smart contract applications.
In addition to product and platform features, WisdomTree maintains a robust governance framework to oversee Fund activities, which seeks to ensure compliance with applicable laws, rules, and regulations. As a publicly traded company (NYSE: WT), WisdomTree, Inc., adheres to rigorous financial reporting and auditing standards which aim to provide transparency and accountability. WisdomTree, Inc. is also the parent company of a few of the Fund’s service providers. Our SEC-registered broker-dealer, investment adviser, and transfer agent operate under strict regulatory oversight. These highly regulated entities, combined with cutting-edge compliance technology such as blockchain-based controls and digital fund oversight, seek to ensure that WisdomTree remains a leader in regulated digital finance.
Through a relationship with WisdomTree, Frax gains access to a scalable tokenization platform with low minimums, API-capabilities, and institutional-grade infrastructure. We are committed to developing new features, functionality, and products that align with the evolving needs of Frax and its community. WisdomTree is working towards future enhancements such as instant trading and additional DeFi integrations, while exploring mint and redemption capabilities with Frax USD and token expansion on Fraxtal chain.
By integrating WTGXX for its stablecoin reserves, Frax accesses a regulated 40 Act fund backed by U.S. Treasuries, offering institutional-grade security, yield, and on-chain liquidity. WTGXX utilizes blockchain-integrated recordkeeping and WisdomTree’s stablecoin conversion service for USDC subscriptions and redemptions, making it a highly liquid and scalable solution for stablecoin collateral. By leveraging WTGXX, Frax USD can enhance reserve stability and optimize yield generation through a transparent and regulatory-compliant structure.
WisdomTree Bio:
WisdomTree, Inc., through its subsidiaries, is a global financial innovator, offering a well-diversified suite of exchange-traded products (ETPs), models, solutions and products leveraging blockchain technology. As of March 4, 2025, WisdomTree had $114.0 billion in global assets under management, making the company the largest public independent ETF provider. Building on our heritage of innovation, we are developing and have launched next-generation digital products, services and structures, including a suite of 13 digital funds, ranging from a money market fund, equities, fixed income, and asset allocation models, in addition to tokenized assets, such as gold. We provide access to their assets through our blockchain-native digital wallet, WisdomTree Prime®, for U.S. Retail investors and our institutional platform WisdomTree Connect™.1 WisdomTree leverages the latest financial infrastructure to create products that provide access, transparency and an enhanced user experience.
1 The digital asset related services described herein are generally made available through WisdomTree Digital Movement, Inc. (NMLS ID: 2372500), in select jurisdictions and may be limited where prohibited by law.
Note that this document focuses primarily on WisdomTree’s digital assets and blockchain focused business, which is comprised of separate subsidiaries within WisdomTree (and a sub-set of the employees within WisdomTree as employed by the applicable subsidiary) which commenced in 2021 and includes the separate advisory subsidiary, WisdomTree Digital Management, Inc. (the investment adviser to WTGXX), commencing in 2022, and money services subsidiary, WisdomTree Digital Movement, Inc., commencing in 2023, among other affiliated entities, some of which are further noted below. General references to “WisdomTree”, “our” or similar usage are used for ease of reading but should be read to ultimately refer to the actual entity providing the product or service, as applicable.
Proposal Details
General Overview:
WTGXX invests in a portfolio of U.S. Treasury and government securities. Such securities may include: U.S. Treasury Notes (both fixed and floating rate), U.S. T-Bills, U.S. Government Agency Notes, including Discount Notes, that are either fixed or floating rate and issued by government agencies such as the Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”) or the Federal Farm Credit Bank. The Fund may invest in repurchase agreements collateralized fully by U.S. Treasury securities, U.S. Government Agency securities or cash. The Fund may also invest in other investment companies that are government money market funds to the extent permitted under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Fund has adopted a non-fundamental investment policy in accordance with Rule 35d-1 under the 1940 Act to invest under normal circumstances, at least 80% of the value of its net assets, plus the amount of any borrowings for investment purposes, in government securities and repurchase agreements that are collateralized by government securities.
The securities purchased by the Fund are subject to the quality, diversification, and other requirements of Rule 2a-7 under the1940 Act, and other rules adopted by the Securities and Exchange Commission (the “SEC”).
Please see the Prospectus and SAI (see supplementary documents) for additional information, including additional strategy information and risk factors.
As an ERC-20 token, digital representations of WTGXX’s shares can be maintained by any wallet provider that operates on the Ethereum public blockchain. The tokenized shares of WTGXX are expected to soon be available natively on Arbitrum, Avalanche, Base, and Optimism.
As of 3/4/2025, cumulative AUM across chains is $112.32M. Additionally, as of 3/4/2025, WTGXX has processed over 8,300 transactions with over $114.5M in total volume.
Asset Eligibility:
WTGXX invests in a portfolio of U.S. Treasury, government securities and repurchase agreements. The securities purchased by the Fund are subject to the quality, diversification, and other requirements of Rule 2a-7 under the 1940 Act, and other rules adopted by the SEC. The Fund maintains a policy pursuant to Rule 2a-7 to which the Adviser and the Sub-Adviser must follow. Rule 2a-7 is the principal rule governing money market funds in the U.S. This rule covers a range of topics that seek to ensure the ability of WTGXX to maintain a stable $1.00 NAV and meet redemption orders in a timely manner. These topics include maturity of investments, type and quality of investments, issuer diversification, disclosure of portfolio holdings, fund liquidity, determination of amortized cost-based and market-based NAVs, and stress testing. Stress testing includes periodically testing and reporting to the WisdomTree Digital Trust Board of Trustees, which oversees the Fund (“Fund Board”), the test results, assumptions, and related assessments of the Fund’s ability to withstand stressful economic and financial market conditions.
Further, with respect to portfolio liquidity, WTGXX must hold securities that are sufficiently liquid to meet reasonably foreseeable shareholder redemptions in light of the Fund’s obligations under section 22(e) of the 1940 Act to timely process shareholder redemptions. Specifically, this means WTGXX must maintain 25% of total assets in Daily Liquid Assets, 50% of the total assets in Weekly Liquid Assets, and a 5% maximum limit for investment in “illiquid” securities at the time of acquisition (defined as any security that cannot be sold or disposed of within seven days at approximately the market value ascribed to it).
As stated above, the WisdomTree Digital Trust structure in place is subject to the shareholder protections provided by the 1940 Act, included those intended to limit bankruptcy risks. The Fund’s assets are held with an independent custodian, Bank of New York Mellon, in a segregated account. In the case of a bankruptcy of WisdomTree, Inc, its affiliates or any of the Fund’s service providers, including the custodian, such entities would have no claim to the Fund’s assets and the Fund would not be part of the bankruptcy proceedings.
Detailed holdings are available on /www.wisdomtree.com/investments/digital-funds/money-market/wtgxx)
Yield Considerations:
As of 3/4/2025, the current 7-day yield after all fees is approximately 4.07%.
WTGXX declares dividends of net investment income every U.S. trading day (each day the NYSE is open for trading) as of 4:00 pm ET and distributions are made monthly (first business day of the following month). WisdomTree facilitates orders and dividend payments in WisdomTree Connect via fiat (USD) and USDC, via our Stablecoin Conversion Service*.
* Please note investors cannot directly purchase shares of the Fund via USDC but are processed via the Stablecoin Conversion Service that is an operational process facilitated by WisdomTree. All future references to the Stablecoin Conversion Service and operations are describing the client’s experience.
Fee Considerations:
The expense ratio is 0.25%. There are no transaction, subscription or minting fees or other service fees. Investors are responsible for gas fees for their transfers of tokens to another wallet, such as utilizing USDC via the Stablecoin Conversion Service and potentially stablecoin burn fees.
Fees and Expenses of the Fund
The following table describes the fees and expenses you may pay if you buy, hold, and sell shares of the Fund. The fees are expressed as a percentage of the Fund’s average net assets.
| Column 1 | Column 2 | |
|---|---|---|
| Shareholder Fees (fees paid directly from your investment) | None | |
| Annual Fund Operating Expense (expenses that you pay each year as a percentage of the value of your investment) | ||
| ----- Management Fees | 0.25% | |
| ----- Distribution and / or Services (12b-1) Fees | None% | |
| ----- Other Expenses | 0.00% 1 | |
| Total Annual Fund Operating Expenses | 0.25% |
1 “Other Expenses” are based on estimated amounts for the current fiscal year.
Other notes:
- All fees are described above and in the Fund’s Prospectus. Unlike many other types of investment vehicles and funds, which may charge investors a variety of “other” expenses, the Adviser provides investment advisory services and pays the Fund’s operating expenses in return for a “unitary fee”, and pays such other expenses, with certain limited exceptions.
- Secondary market transfers or sales may incur gas fees and are subject to potential price fluctuations, including premiums or discounts, which can be unpredictable.
Permissioning:
Potential investors in WTGXX are required to complete traditional KYC (including enhanced due diligence, as applicable) and AML regulatory processes to participate as investors and wallet screening is conducted with respect to potential wallets onboarded via WisdomTree Connect. Once the investor completes the onboarding process, an onchain attestation, represented by a non-transferable soulbound NFT, is issued to the investor’s wallet and only those registered wallets can participate in transactions. WisdomTree issued soulbound NFTs cannot be transferred and can be revoked by WisdomTree in the event that client status or conditions change. In addition, shareholders can peer-to-peer transfer WTGXX tokens to other onboarded shareholders with registered wallets as described above with the Transfer Agent maintaining the official record of share ownership. In this manner, WisdomTree prevents transactions between unknown persons or unknown blockchain wallets.
Subscription and Redemption Overview:
WTGXX allows for several methods of subscription and redemption:
- On the primary market, WisdomTree can facilitate subscriptions and redemptions via USDC and fiat (USD) with no limit.
- Onboarded WisdomTree Connect investors may also acquire or transfer WTGXX tokens through peer-to-peer transfers 24/7/365, subject to the availability from other onboarded ecosystem participants.
Subscription and Redemption Timing:
The generally expected time frame for the settlement of subscriptions and redemptions on U.S. trading days is T+0 (same day) for trades before 1:00 PM ET and T+1 for later trades. Orders and payments must be received by the applicable cut-off time on U.S. trading days to receive WTGXX shares the same day. Subscriptions and redemptions generally settle shortly after the NAV strike at 4:00 pm ET. WisdomTree Transfers, the Fund’s Transfer Agent, records all subscriptions and redemptions for the Fund. To date, the Transfer Agent has not had any interruptions in the ability to process transactions in the SEC prescribed timeframes.
The AUM of the Fund and other transaction volume in and out of the Fund does not generally affect the Fund’s ability under normal market conditions to facilitate redemptions on trading days. As mentioned earlier, the Fund maintains a policy pursuant to Rule 2a-7. In adhering to this policy, WisdomTree believes the Fund is well positioned to meet daily redemption expectations under current market conditions and maintain a stable $1.00 NAV.
Liquidity Vehicles:
Currently, investors purchase and redeem shares of WTGXX via a primary market subscription or redemption by interacting directly with the WisdomTree Connect platform with no limit. API connectivity is also available via WisdomTree Connect for investors to access WTGXX.
We are working on multiple solutions to further enhance the experience of clients entering and exiting positions of WTGXX. In the near term, we are developing one-way pricing for instant sales of WTGXX (with a daily capacity cap via WisdomTree) for USDC via the Stablecoin Conversion Service.
We are exploring the functionality to provide two-way pricing for instant liquidity on both purchases and sales. This functionality would allow investors to purchase and sell WTGXX instantly via USDC using the Stablecoin Conversion Service, potentially without a daily capacity cap. We believe this functionality would provide investors with a strong user experience, and, while there are no guarantees of its timing or ultimate availability due to a need for existing regulations and/or required licenses to evolve, we will continue to work towards this functionality.
Tokenholder Rights:
WTGXX is a registered 1940 Act fund that enables shareholders to manage balances onchain while receiving the investor protections and benefits of shareholder rights under applicable U.S. law, including the 1940 Act. Shares of the Fund have a pro rata interest in its assets. Shares have no preemptive, exchange, subscription or conversion rights. Each share is entitled to participate equally in dividends and distributions declared by the Fund Board with respect to the Fund, and in the net distributable assets of the Fund on liquidation.
Each share has one vote with respect to matters upon which a shareholder vote is required consistent with the requirements of the 1940 Act and the rules promulgated thereunder. These shareholder voting rights generally include election of, or changes in, the Fund Board under applicable circumstances and approval of advisory agreements, including increases in management fees, each as further described in and subject to the Fund’s governing documents, Prospectus or otherwise as prescribed in the 1940 Act, as applicable.
The Ethereum token is a record of the investor’s Fund ownership. Under WisdomTree Transfer’s integrated recordkeeping system, the onchain record is aligned with book-entry records maintained by WisdomTree Transfers. WisdomTree Transfers maintains a master shareholder file for all primary market purchases, primary market sales, and peer-to-peer transfers of the token between eligible tokenholders.
Future Roadmap:
We have actively engaged with the Frax Finance team to fully understand the unique needs and objectives of the Frax community. We have the capability to build enhancements and integrations to better support Frax USD and the Fraxtal network including:
- We are focused on expanding mint and redeem optionality for our institutional platform. We are working with the Frax Finance team on cash redeemability and scoping integration directly with Frax USD as a denomination asset for our tokenized funds via the stablecoin conversion service.
- We are currently evaluating the addition of the Fraxtal network to our multi-chain strategy. We support the organic growth of chains by providing direct onchain access to our full suite of tokenized products. We are also excited to explore a deeper partnership with the Fraxtal network on product distribution, Defi integrations, and institutional settlement opportunities.
- In addition to the solutions and products detailed above, WisdomTree, through applicable global subsidiaries, has the ability to deliver customized asset allocation guidance and direct access to our research and expertise to meet the community’s specific investment objectives. Our Global Research Team and Chief Investment Office focus on four areas: product development, investment research, model portfolio management across various asset classes (equities, fixed income, alternatives, crypto), and strategic asset allocation. We can design and actively manage investment strategies that align with the community’s specific needs.
Key Parties:
WisdomTree, Inc is the ultimate parent company of the WisdomTree named entities below.
- Investment Adviser: WisdomTree Digital Management, Inc. (“Adviser”)
The Adviser serves as the investment adviser to the Fund. The Adviser is a Delaware corporation registered with the SEC as an investment adviser under the Investment Advisers Act of 1940. The Adviser is responsible for the overall general management and administration of the Fund.
WisdomTree Digital Management provides an investment program for the Fund. The Adviser also provides proactive oversight of the Sub-Adviser, daily monitoring of the Sub-Adviser’s buying and selling of securities for the Fund, and regular review of the Sub-Adviser’s performance. In addition, the Adviser arranges for, and oversees, sub-advisory, transfer agency, custody, fund administration, securities lending, and all other non-distribution-related services necessary for the Fund to operate. - Sub-Adviser: Voya Investment Management Co. LLC (“Voya IM”)
Voya IM is responsible for the day-to-day management of the Fund. Voya IM manages the Fund’s portfolio investments and places orders to buy and sell the Fund’s portfolio investments.
Voya IM, a registered investment adviser, is the asset management business of Voya Financial (NYSE: VOYA), overseeing approximately $336 billion in assets for institutions, financial intermediaries and individual investors. Voya IM is one of the 50 largest institutional asset managers globally. Drawing on a 50-year investing legacy and the expertise of 300+ investment professionals, Voya IM strategies span public and private fixed income, equities, multi-asset solutions and alternatives. - Administrator and Custodian: Bank of New York Mellon (“BNY”)
BNY provides certain administrative, legal, tax, and financial reporting services for the maintenance and operations of the Fund as well as acts as custodian of the assets of the Fund. BNY is required, upon the order of the Fund, to deliver securities held by BNY and to make payments for securities purchased for the Fund. - Transfer Agent: WisdomTree Transfers, Inc. (“Transfer Agent”)
WisdomTree Transfers acts as transfer agent for the authorized and issued shares of beneficial interest for the Fund and as dividend disbursing agent of the Trust. The Transfer Agent maintains the official record of share ownership in book-entry form. Under WisdomTree Transfer’s integrated recordkeeping system, the onchain record is aligned with book-entry records maintained by WisdomTree Transfers. - Auditor: Ernst & Young LLP (“EY”)
EY is one of the world’s largest accounting firms, providing global tax, audit, and advisory services to thousands of clients. EY audits WTGXX’s financial statements annually in seeking to ensure accurate and compliant financial reporting. - Distributor in the U.S.: Foreside Fund Services, LLC (the “Distributor”)
The Distributor has entered into a Distribution Agreement with the Trust pursuant to which it distributes shares of the Fund
Summary:
WTGXX offers Frax Finance a regulated, yield-bearing reserve asset backed by U.S. Treasuries, combining institutional security, on-chain efficiency, and seamless USDC conversion for scalable and transparent collateral management. The Fund operates within SEC Rule 2a-7 regulations for money market funds, offering a stable $1.00 NAV per share with daily accrued dividends, making it a competitive yield-bearing alternative for stablecoin treasuries.
We have developed products and platforms that seek to seamlessly integrate between the TradFi and DeFi worlds while implementing WisdomTree’s robust and rigorous compliance framework. We are committed to delivering Frax Finance and the community best-in-class service, including adapting, building, and evolving our products, solutions, platforms, and integration points.
Supplementary documents:
- WTGXX general website [/www.wisdomtree.com/investments/digital-funds/money-market/wtgxx]
- Prospectus [/prospectusconnect.com/pdf-viewer/stationary_prospectus/114/dHNyLWZpbGVzL3N0YXRpb25hcnlfcHJvc3BlY3R1cy8xNzIxODMyODgzXzMyMTA3X1BST19Hb3Zlcm5tZW50TW9uZXlNYXJrZXREaWdpdGFsRnVuZC5wZGY=/1]
- SAI [/prospectusconnect.com/pdf-viewer/statement/114/c3RhdGVtZW50X29mX2FkZGl0aW9uYWxfaW5mb3JtYXRpb24vMTczMjY4NTA2Nl8zMTk2OF9XVERUIENvbWJpbmVkIFNBSV80OTdfQk5ZIFRyYW5zaXRpb24ucGRm/1]
- Ethereum token address: 0x1feCF3d9d4Fee7f2c02917A66028a48C6706c179
- Audit reports for the smart contract are available at Token Standards and Token Standard Annex
Voting
- For: Invest in WTGXX as a reserve (backing) asset for Frax USD
- Against: Do nothing
IMPORTANT INFORMATION
Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund before investing. To obtain a prospectus containing this and other important information, please call 866.909.9473, or visit /WisdomTree.com/investments to view or download a prospectus online. Read the prospectus carefully before you invest. There are risks involved with investing, including the possible loss of principal. Past performance does not guarantee future results.
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not a bank account and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s adviser is not required to reimburse the Fund for losses, and you should not expect that the adviser will provide financial support to the Fund at any time, including during periods of market stress.
PRODUCTS AND SERVICES AVAILABLE VIA WISDOMTREE CONNECT: NOT FDIC INSURED | NO BANK GUARANTEE | NOT A BANK DEPOSIT | MAY LOSE VALUE | NOT SIPC PROTECTED | NOT INSURED BY ANY GOVERNMENT AGENCY
WisdomTree Digital Funds are distributed by Foreside Fund Services, LLC. Foreside Fund Services, LLC is not affiliated with the other entities.
The products and services available through the WisdomTree Connect portal are not endorsed, indemnified or guaranteed by any regulatory agency.
The WisdomTree Connect portal and certain related services described herein are made available through WisdomTree Digital Movement, Inc., a federally registered money services business, state-licensed money transmitter and financial technology company (NMLS ID: 2372500).
WisdomTree Transfers, Inc., the Fund’s transfer agent, maintains the official record of share ownership through an integrated recordkeeping system with records in book-entry form and records that are recorded – or digitized – on the Ethereum blockchain. In order to facilitate the use of blockchain technology, a potential institutional shareholder must have a blockchain wallet. WisdomTree Securities, Inc., an affiliate of WisdomTree Transfers and WisdomTree Digital, facilitates the ability for Fund investors on an “application-way” basis to purchase or sell shares.
A blockchain is an open, distributed ledger that digitally records transactions in a verifiable and immutable (i.e., permanent) way using cryptography. A distributed ledger is a database in which data is stored in a decentralized manner. Cryptography is a method of storing and transmitting data in a particular form so that only those for whom it is intended can read and process it. A blockchain stores transaction data in “blocks” that are linked together to form a “chain”, and hence the name blockchain. Blockchain technology is a relatively new and untested technology, with little regulation. Blockchain systems could be vulnerable to fraud, particularly if a significant minority of participants colluded to defraud the rest. Potential risks also include vulnerability to theft, or inaccessibility, and future regulatory developments could affect its viability.
The information provided is for informational purposes only and intended solely for institutions. The information is a summary of steps and not a complete or comprehensive guide to all steps or actions related to shareholder onboarding, transactions, settlement and related matters.
The information is not intended to serve as a recommendation to buy, hold or sell any asset or to engage in any investment or trading strategy or to use any service. The information herein should not be relied on and is not a substitute for the skill, judgment and experience of the user when making investment and other business decisions. All information is impersonal and not tailored to the needs of any person, entity or group of persons. None of the information constitutes an offer to sell or a solicitation of an offer to buy, any security or other asset, financial product or other investment vehicle or any trading strategy, or service, and should not be viewed as trading or investment advice. Potential products and services, as well as applicable launch timing and associated fees, are in development, will require third party relationships and may change or may never become available, including due to regulatory considerations. Any information provided and/or plans associated herewith are subject to change without notice and WisdomTree is under no obligation to provide additional information.