Tokenized U.S. Treasuries have become the second largest category of real-world assets (RWA) after stablecoins and have now entered a new phase. Tokenized money market funds (MMF) concentrate cash investments in short-term U.S. government securities, shifting their use from passive income generation to serving as collateral for trading, credit, and repurchase agreements.
As of the end of October, the total market value of tokenized Treasuries reached $8.6 billion, up from $7.4 billion in mid-September. Among these, BlackRock BUIDL increased to approximately $2.85 billion, Circle's USYC reached $866 million, and Franklin Templeton BENJI stood at $865 million. Fidelity's newly launched tokenized MMF also performed well, growing to $232 million.
The digital form of Treasury bills is circulating through settlement and margin systems that support traditional collateral markets. The first practical test of funds as collateral occurred in June when BUIDL was approved for listing on Crypto.com and Deribit. By the end of September, Bybit further expanded this concept by announcing the acceptance of QCDT—a DFSA-approved tokenized money market fund backed by U.S. Treasuries—as collateral. Professional clients can pledge this token on the trading platform instead of cash or stablecoins, thereby earning the underlying returns of the Treasury fund while maintaining trading exposure.
In the traditional banking sector, Singapore's DBS Bank has become the first institution to actively test tokenized funds. The bank confirmed that it will open trading and lending of Franklin Templeton sgBENJI (its on-chain version of the U.S. government money fund) alongside Ripple RLUSD stablecoin on the DBS Digital Exchange. Additionally, the bank is piloting the use of sgBENJI as collateral for repurchase and credit agreements. This project transforms tokenized money market funds from passive investment tools into active components of bank financing infrastructure.
Infrastructure connecting banks and blockchain systems has also made progress. Chainlink and Swift, in collaboration with UBS Tokenize, completed a pilot that processed subscriptions and redemptions of a tokenized fund through standard ISO 20022 messaging. In short, this test demonstrated that the information format currently used by banks for settling securities and payments can now trigger smart contract operations on the blockchain.
This pilot marks a clear advancement in interoperability. Currently, tokenized funds mostly exist in their respective independent digital systems, requiring custom interfaces to connect with banks. The adoption of ISO 20022 as a messaging format provides a common language for both parties, enabling custodians and fund managers to circulate these assets through existing traditional securities settlement and reporting processes.
For investors and institutions, this means that tokenized Treasuries are gradually integrating into conventional financial workflows, no longer just isolated products in crypto laboratories.
The market is still dominated by a few large funds but is gradually achieving more diverse distribution. BlackRock BUIDL still holds about 33% of the market share, making it the largest single product; Franklin Templeton BENJI, Ondo OUSG, and Circle USYC each account for around 9% to 10%.
The table below shows that this pattern is changing. Once nearly monopolized by a single product, several regulated managers are now sharing significant market shares. This distribution helps enhance liquidity and makes it easier for platforms and banks that prefer diverse risk exposures to accept related collateral.
The main obstacle affecting the development of tokenized Treasuries is not demand but regulatory thresholds. Most of these funds are only open to "Qualified Investors" as defined by U.S. securities law (typically institutions or high-net-worth individuals).
The redemption time is also a subtle but important limitation. Like traditional money market funds, the tokenized version only allows redemptions or subscriptions during specific time periods. During large redemptions or liquidity pressures, this arrangement may lead to delays in fund withdrawals or injections, making its performance more akin to traditional funds rather than around-the-clock crypto assets.
Moreover, these products still primarily trade on platforms with lower liquidity and rely on blockchain settlement cycles. Therefore, exchanges often assign a higher discount to their accounting value compared to traditional Treasuries. For example, platforms like Deribit impose about a 10% margin reduction, while Treasuries in the traditional repurchase market only have about a 2% discount.
This difference reflects operational risk rather than credit risk, such as redemption delays, on-chain transfer finality, and insufficient secondary market liquidity. As related products mature and reporting standards tighten, these discounts are expected to gradually narrow to traditional money market fund levels.
The focus in the next quarter will be on integrating the pilot results mentioned in this article. Whether it is the repurchase tests led by DBS Bank, experiments from major platforms, or the Swift x Chainlink ISO 20022 integration, all point towards the development direction of routine collateral use.
On the regulatory front, the U.S. Commodity Futures Trading Commission (CFTC) launched the "Tokenized Collateral and Stablecoins Initiative" on September 23. If the related consultations and repurchase projects proceed smoothly, it would mean that tokenized Treasuries will transition from the experimental phase to production-grade tools, becoming an active layer in the global collateral system, bridging commercial bank balance sheets, stablecoin liquidity, and on-chain finance.
Related: How the Trump Family Turned Cryptocurrency into an $800 Million Gold Rush
Original article: “Tokenized Treasuries Cross $8.6B as Banks and Exchanges Push Collateral Use”
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