From performance to warranty: the $8.6 billion tipping point
Tokenized US Treasuries, the largest real-world asset (RWA) class after stablecoins, have entered a new phase. Tokenized money market funds (MMFs), which pool cash in short-term U.S. government securities, are moving from passive yield to collateral for trading, credit and repo transactions.
At the end of October, the total market capitalization of tokenized Treasuries reached $8.6 billion, up from $7.4 billion in mid-September. The increase was led by BlackRock’s BUIDL, which reached around $2.85 billion, followed by Circle’s USYC at $866 million and Franklin Templeton’s BENJI at $865 million. Fidelity’s recently launched tokenized MMF also showed impressive growth and amounted to $232 million.
Institutional adoption: exchanges, banks and custodians intervene
Digital representations of Treasury bills are beginning to move through the same settlement and margin systems that underpin traditional collateral markets. The first practical test of funds as collateral came in June, when BUIDL was approved on Crypto.com and Deribit. In late September, Bybit expanded on the concept and announced that it would accept QCDT, a tokenized money market fund approved by the DFSA and backed by US Treasuries, as collateral. Professional clients can post the token on the exchange’s trading platform instead of cash or stablecoins. This allows them to capture the underlying performance of the Treasury fund and maintain trading exposure.
In traditional banking, DBS became the first to move towards actively testing tokenized funds. The Singapore lender confirmed that it will make Franklin Templeton’s sgBENJI, which is the on-chain version of its US Government Monetary Fund, available for trading and lending on the DBS Digital Exchange, alongside Ripple’s RLUSD stablecoin. The bank is also running pilot transactions to use sgBENJI as repo and credit collateral. The project converts tokenized money market funds from a passive investment to a functional part of the bank’s financial infrastructure.
Infrastructure and messaging: the hidden driver of tokenized finance
The infrastructure linking banks and blockchain systems has also advanced. Chainlink and Swift, in collaboration with UBS Tokenize, completed a pilot that processed subscriptions and redemptions for a tokenized fund using standard ISO 20022 messages. In simple terms, the test demonstrated that the same message format that banks already use to settle securities and payments can now trigger smart contract actions on a blockchain.
The pilot marks a clear step towards interoperability. Until now, tokenized funds have existed in separate digital systems that required custom links to connect with banks. Using ISO 20022 as a message format provides both parties with a shared language. It allows custodians and fund managers to move tokenized assets through the same settlement and reporting processes already used for traditional securities.
For investors and institutions, this means that tokenized Treasuries are starting to fit into the normal financial workflow instead of being left aside as a crypto experiment.
Market composition and frictions
The market is still led by a handful of large funds, but is slowly diversifying. BlackRock’s BUIDL still holds the largest market share with approximately 33% of total tokenized Treasuries. Franklin Templeton’s BENJI, Ondo’s OUSG and Circle’s USYC each account for about 9% to 10%.
A quick look at the chart below shows how this balance is starting to shift. The space that was once almost entirely dominated by one instrument now has several regulated managers sharing significant portions of the market. This spread spreads liquidity and makes accepting collateral more practical for venues and banks that prefer diversified exposure.
Where tokenized Treasuries still encounter friction is not on the demand side, but through regulatory hurdles. Most funds are open only to qualified buyers under U.S. securities law, typically institutions or high net worth individuals (HNWIs).
Time limits are another subtle but important limit. Like traditional money market funds, tokenized versions only allow redemptions and new subscriptions at specific times of the day. During periods of large redemptions or liquidity stress, this schedule may delay withdrawals or liquidity injections. This makes them behave less like 24/7 crypto assets and more like traditional funds.
Tokenized funds still trade on less liquid markets and depend on blockchain settlement cycles. Therefore, stock markets tend to discount their published value more heavily than conventional Treasury bills. For example, places like Deribit apply margin reductions of approximately 10%. Treasuries in traditional repo markets, on the other hand, only have haircuts of around 2%.
The difference reflects operational rather than credit risk, such as repayment delays, finality of on-chain transfers and lower secondary market liquidity. As tokenized Treasuries mature and reporting standards tighten, these discounts are expected to narrow toward conventional money market standards.
Perspectives: from pilots to production
The next quarter will be about connecting the pilots mentioned in this article. Repository testing by DBS, exchange experiments, and the Swift x Chainlink ISO 20022 integration all point towards the routine use of intraday collateral.
On the regulatory front, the US CFTC kicked off its Tokenized Collateral and Stablecoins Initiative on September 23. If these consultations and buyback programs progress, Tokenized Treasurys should move from pilot projects to production-level tools. They will function as an active layer of the global collateral stack, uniting bank balance sheets, stablecoin liquidity, and on-chain finance.
This article does not contain investment advice or recommendations. Every investment and trading move involves risks, and readers should conduct their own research when making a decision.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Cointelegraph does not endorse the content of this article or any products mentioned in it. Readers should do their own research before taking any action related to any product or company mentioned and take full responsibility for their decisions.
