Tokenized treasuries are digital versions of U.S. Treasury securities, including Treasury bills, notes, and bonds, issued on a blockchain. These tokens are backed by actual US government obligations, ensuring their value and security. The process involves:
- Custodial Holding: A regulated entity purchases and holds the U.S. Treasuries in a custodial account.
- Token Creation: Smart contracts create digital tokens that represent ownership of these securities. These tokens are usually backed one-to-one by the underlying Treasury asset.
- Trading and Transfer: Investors can trade these tokens on blockchain platforms, allowing transactions without intermediaries.
Introduction to Tokenized Treasuries
Tokenized treasuries are transforming the investment landscape for US Treasury securities by leveraging blockchain technology to offer new opportunities for investors.
Given that tokenized treasuries can be seamlessly integrated into DeFi platforms, they serve as collateral or yield-generating assets, opening new financial opportunities for investors seeking to explore popular decentralized applications (dApps).
The tokenized treasuries market was worth over $3.5B as of February 2025, according to data from RWA.xyz.
All in all, tokenized treasuries are just the combination of the stable yields of a traditional market like T-bonds while also offering the transparency and immutability of blockchain technology. They break down traditional barriers that usually hinder investors from entering particular markets, enabling worldwide to access US Treasury yields without relying on conventional banking systems.
This global participation democratizes the investment process, making it easier for retail investors to engage with these assets. Another interesting perk is that tokenization allows for fractional ownership, meaning smaller investors can buy into these typically high-value assets.
Benefits of Tokenized Treasuries
Unlike conventional treasuries, which are limited to specific market hours, tokenized treasuries offer 24/7 trading on blockchain platforms.
The round-the-clock trading significantly enhances liquidity and offers greater flexibility for investors, allowing them to adjust their strategies more dynamically. Moreover, the ease of trading tokens creates a more active secondary market, which increases overall liquidity and provides more opportunities for both buyers and sellers.
Tokenization minimizes the reliance on intermediaries such as brokers and custodians, which leads to lower transaction costs and the potential for higher returns for investors. Smart contracts further enhance cost efficiency by automating processes like interest payments and compliance checks. Therefore, automation reduces administrative burdens and streamlines operational workflows, making investments in treasuries more efficient.
Moreover, blockchain technology ensures that all transactions involving tokenized treasuries are recorded transparently and immutably, providing a trustworthy record of ownership and transaction history. Transparency translates into more investor trust, and the cryptographic nature of blockchain technology offers strong protection against fraud and unauthorized access, significantly increasing investor confidence in these digital assets.
Biggest Issuers of Tokenized Treasuries
Below are some of the leading issuers and managers of US tokenized treasuries.
Hashnote – USYC
USYC is structured as a tokenized investment vehicle, allowing holders to benefit from the yield of short-term U.S. Treasury Bills and reverse repurchase agreements (reverse repos). These underlying assets are securely held in custody by Bank of New York Mellon, ensuring regulatory compliance and asset protection.
USYC has emerged as the largest tokenized U.S. Treasury asset, surpassing competitors such as BlackRock’s BUIDL token. By early 2025, its market capitalization exceeded $1.52 billion, reflecting strong investor demand for yield-generating digital assets.
In January 2025, Circle Internet Group acquired Hashnote, signalling a move toward deeper integration of USYC within Circle’s USDC stablecoin ecosystem. This development is expected to enhance liquidity by linking tokenized Treasury funds with stablecoins and strengthen institutional adoption of digital assets backed by real-world financial instruments.
BlackRock – BUIDL
BlackRock BUIDL, officially the BlackRock USD Institutional Digital Liquidity Fund, is a ground-breaking tokenized fund launched in March 2024, marking a significant integration of traditional finance with blockchain technology. It uses the Ethereum network for BUIDL, which primarily invests in safe assets like cash, US Treasury bills, and repurchase agreements, offering stable returns.
As the largest tokenized treasury fund, it quickly surpassed competitors, reaching a market capitalization of over $630 million and capturing around 27% of the tokenized treasury market share.
Franklin Templeton – BENJI Fund
The Franklin OnChain US Government Money Fund, known as the BENJI Fund, is a tokenized money market fund launched by Franklin Templeton in April 2021. It is the first US-registered mutual fund to use public blockchain technology for transactions and ownership records.
The BENJI Fund maintains a safe investment strategy by investing primarily in US government securities, cash, and collateralized repurchase agreements, with about 99.5% of its assets in these categories. With over $530M in assets under management, it is one of the largest tokenized treasury funds, only surpassed by BlackRock’s BUIDL.
Ondo Finance – OUSG
Ondo Finance is a financial technology company that specializes in tokenized investment products, particularly fixed-income securities. It offers tokenized funds that provide access to low-risk yields backed by US Treasuries and other securities.
Its key products include the Short-Term US Government Bond Fund (OUSG), which offers liquid exposure to short-term US Treasuries with 24/7 stablecoin subscriptions and redemptions, and the Superstate Short Duration US Government Securities Fund (USTB), targeting short-duration Treasury bills with easy trading through ERC-20 tokens.
What is Tokenization?
Tokenization can sound complex —and it is, but let’s simplify it (or at least try to):
Tokenization is the process of creating a digital representation, or “token,” of a physical or digital asset. This token is a proxy for the original asset, containing essential information about it. The actual asset remains safely stored off-chain or in a centralized vault while the token is managed, transferred, and traded on a blockchain network.
For example, tokenizing a real estate asset is essentially taking the property’s data and putting it on the blockchain —the process is, of course, more complicated than that— and opening up new windows of opportunities, such as fractional ownership/investment.
Real-World Applications of Tokenization
Tokenization can be implemented differently, depending on the use case and the desired security level. In some cases, cryptographic algorithms generate tokens that can be reversed back to the original asset using a specific key. Alternatively, hash functions create tokens that can’t be reversed, ensuring higher security.
Another approach involves generating tokens randomly without any direct link to the original asset data.
Here’s a quick rundown on the applications of tokenization:
- Financial Services: Traditional assets such as stocks, bonds, and commodities are being tokenized, offering enhanced liquidity and transparency. Tokenized money market funds are gaining popularity as investment options.
- Payment Processing: Credit card information is replaced with tokens during online or mobile transactions, minimizing fraud risk and ensuring compliance with regulatory standards.
- Healthcare: Patient data can be tokenized to protect sensitive information, allowing secure access by authorized personnel while ensuring compliance with regulations like HIPAA.
- Supply Chain Management: Tokenization enhances transparency by enabling secure tracking of goods through each stage of the supply chain, improving traceability.
Despite its advantages, tokenization faces several obstacles. Regulatory uncertainty poses a significant challenge, as companies need to navigate complex and evolving legal frameworks related to cryptocurrencies and digital assets.
Integration with existing systems can also be difficult, often requiring substantial investment in infrastructure and training, given that many businesses still operate on legacy systems. Of course, the success of tokenized assets depends on building trust among investors and institutions, which requires time and education about the technology’s benefits.
Disclaimer
This article is provided for information only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
