For years, decentralized finance (DeFi) operated on the assumption that purely crypto-native assets could form the entire monetary base for a parallel financial system. Billions in DeFi loans were anchored by staked Ethereum, wrapped Bitcoin backed perpetual swaps, and algorithmic stablecoins attempted to generate synthetic dollars from protocol emissions. The underlying belief was that crypto could entirely bootstrap its own collateral hierarchy, untouched by the immense $27 trillion US Treasury market. However, over the past 18 months, this fundamental premise has quietly, yet decisively, been replaced.
The Paradigm Shift: From Crypto-Native to Real-World Assets
The numbers speak volumes: tokenized US Treasuries and money-market funds now command roughly $9 billion, spread across approximately 60 distinct products and reaching over 57,000 holder addresses. These offerings typically provide an average seven-day yield near 3.8%. This isn't just growth; it's an astonishing surge of more than five times within the period. Expanding our view to the entire real-world asset (RWA) stack on public blockchains, the figure approaches $19 billion, with government securities and income products firmly dominating the landscape, as highlighted by rwa.xyz data.
Treasuries have become the new backbone of this evolving RWA ecosystem, effectively mirroring their crucial function in the traditional $5 trillion US repo market. This is far from boutique experimentation. BlackRock's BUIDL fund has rapidly approached $3 billion in size, gaining acceptance as collateral on Binance and extending its reach to BNB Chain. Franklin Templeton's BENJI token represents over $800 million in a US-registered government money-market fund, with its shareholder records managed on seven different networks. Circle's USYC quietly surpassed $1.3 billion, fueled by a partnership with Binance allowing institutional investors to use the token for derivatives trading. Even JPMorgan launched a $100 million tokenized money-market fund on Ethereum, enabling qualified investors to subscribe and redeem in USDC. The infrastructure connecting Wall Street's custody mechanisms to Ethereum's rails is now fully operational, no longer just a theoretical concept.
Diverse Approaches: How Issuers are Tokenizing Treasuries
The issuer landscape showcases competing philosophies for how crypto collateral is evolving:
- BlackRock's BUIDL: This tokenized institutional liquidity fund, managed by Securitize with BNY Mellon handling custody, invests in cash, US Treasuries, and repos. Redemptions are in USDC, with a $250,000 minimum, positioning BUIDL squarely in the institutional lane. Its acceptance as collateral on centralized exchanges and multichain expansion solidify it as high-grade, dollar-denominated collateral.
- Franklin Templeton's BENJI: Taking a different route, its OnChain US Government Money Fund tokenizes the shareholder registry itself. One share equals one BENJI token, with transfer and record-keeping maintained directly on-chain. This innovation bets on public blockchains serving as a primary record for regulated securities.
- Janus Henderson's Anemoy and Ondo Finance's OUSG: Anemoy emphasizes multichain resilience across Ethereum, Base, Arbitrum, and Celo, earning an S&P rating for its tokenization. Ondo, a DeFi-native issuer, partners with institutional back-ends. Its OUSG offers 24/7 minting and redemption in USDC or PayPal's PYUSD, targeting qualified investors seeking Treasury exposure without leaving crypto. Ondo's platform reached $1.4 billion in total value locked.
- Other Players: Matrixdock's STBT rebases interest daily, backed by T-bills and reverse repos. OpenEden's TBILL token received a Moody's “A” rating and is usable as collateral in DeFi protocols. On Solana, nearly $530 million of the $792 million in tokenized RWAs are US Treasuries, with Ondo's USDY acting as an interest-bearing stablecoin within Solana DeFi.
Understanding the Mechanics and Composability Constraints
Most tokenized Treasury products follow a consistent mechanical structure: a regulated fund or special-purpose vehicle holds short-dated US government securities with a traditional custodian. A tokenization platform then mints ERC-20 tokens representing fund shares, recorded on public blockchains. While Franklin's BENJI maintains shareholder records directly on-chain, others like BUIDL and OpenEden's TBILL keep securities custody and fund administration within traditional structures, issuing tokens as economic claims.
It's crucial to understand that these are not tokenized CUSIPs that can be directly redeemed for a T-bill at the Federal Reserve. They are tokenized fund shares, complete with specific redemption windows, minimum sizes, and Know-Your-Customer (KYC) requirements. This distinction naturally limits their permissionless composability. Many tokens reside in allow-listed smart contracts, restricting holding and movement to KYC'd wallets. Some require six-figure minimum redemption sizes, and full composability is often confined to “KYC-DeFi” venues rather than truly public permissionless pools.
"Tokenized Treasuries are evolving into crypto's repo market: a base layer of dollar-denominated, state-backed collateral that everything else, perpetual swaps, basis trades, stablecoin issuance, and prediction market margin, will increasingly clear against."
Despite these constraints, composability is advancing on two fronts:
- Institutional Layer: Tokenized Treasury funds are increasingly used as margin collateral for over-the-counter derivatives. This allows dealers 24/7 collateral movement, unburdened by traditional banking hours. Circle's USYC's rapid growth, nearly six times since its Binance partnership, exemplifies this, growing from approximately $250 million to $1.3 billion across multiple blockchains.
- DeFi Layer: Integration, though fragmented, is real. OpenEden's TBILL tokens can serve as collateral in DeFi lending protocols like River. Matrixdock's STBT integrates with RWA yield platforms, offering roughly 5% APY on short-term Treasuries. MakerDAO held approximately $900 million in RWA collateral (much of it US Treasuries) by mid-2025, with plans for more. Frax's sFRAX vault directly purchases US Treasuries via a partner bank, passing through a yield tracking the overnight repo rate. Protocols like Pendle use yield-bearing collateral to build on-chain interest-rate curves, splitting principal and yield into separate tokens, thus becoming a key price-discovery layer for short-end rates in DeFi. On Solana, over 50% of tokenized RWAs are US Treasuries, with Ondo's USDY and OUSG being dominant positions.
Regulatory Clarity and Systemic Implications
The regulatory framework for tokenized Treasuries addresses three core questions: who can hold these tokens, where they are registered, and how they intersect with stablecoin rules. Most large issuers operate under existing securities law as money-market funds or professional funds. BENJI is a US-registered government money-market fund, and OpenEden's TBILL Fund is BVI-regulated. Janus Henderson's Anemoy even received an S&P rating for its tokenization setup.
Emerging regulations, such as the EU's Markets in Crypto-Assets (MiCA) and proposed US stablecoin legislation, explicitly reference tokenized Treasuries and money-market funds, providing a clearer path for issuers. However, as noted, most composability remains permissioned, confined to KYC-DeFi venues.
Regarding systemic risk, the convergence with stablecoins is critical. Even before on-chain tokenization, Treasuries were the unseen collateral behind systemically important stablecoins. For instance, in mid-2024, Circle held approximately $28.1 billion in short-dated US Treasuries and overnight reverse repos for USDC reserves. Tokenization now makes this collateral itself portable, pledgeable, and composable as DeFi money. Stablecoins monetized Treasuries as reserve assets; tokenized Treasury funds bring that collateral directly on-chain, where it can be rehypothecated, margined, and composed into rate curves and structured products.
Yield Cycle or Structural Shift? Analyzing the Trajectory
The growth trajectory of tokenized Treasuries can be attributed to both cyclical and structural forces.
- Cyclical: The 2023-2025 rate environment provided a strong tailwind. Front-end US yields between 4% and 5% made tokenized T-bills a clear upgrade over zero-yield stablecoins, particularly for market-making firms and DAOs needing to park idle cash on-chain. Issuance climbed from roughly $1.3 billion in early 2024 to $9 billion by December 15th, closely tracking the rise in front-end rates.
- Structural: However, several indicators point to a shift beyond just the rate cycle. Total tokenized RWAs on public chains crossed $18.5 billion, anchored by government debt. Tokenized Treasury funds are now accepted collateral for crypto derivatives and centralized exchange margin. Institutions like JPMorgan are launching tokenized money-market funds on Ethereum to leverage 24/7 settlement and stablecoin rails. DeFi's monetary base has quietly shifted from purely crypto to a blend of stablecoins and RWA-backed instruments, with Maker, Frax, and Pendle increasingly relying on Treasuries. Solana's RWA landscape is dominated by Treasury-backed tokens acting as yield-bearing stablecoins within DeFi applications.
Tokenized Treasuries are rapidly becoming crypto's equivalent of the repo market: a foundational layer of dollar-denominated, state-backed collateral against which everything else in DeFi, from perpetual swaps to stablecoin issuance, will increasingly clear. Whether today's $9 billion grows to $80 billion will depend on regulation and rates, but the underlying infrastructure is firmly established on Ethereum and Solana. The question is no longer if TradFi collateral will migrate on-chain, but how quickly DeFi protocols will re-architect themselves around it.
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