Decentralized Finance: A Shift in Collateral Paradigms
For a span of two years, the decentralized finance (DeFi) ecosystem operated under the foundational premise that entirely crypto-native assets could function as the monetary base for an alternative financial system. This framework was characterized by the utilization of Ethereum staked through Lido, which anchored billions in DeFi loans; wrapped Bitcoin that underpinned perpetual swaps; and algorithmic stablecoins that recycled protocol emissions into synthetic dollar equivalents. This entire construct was predicated on the assumption that the cryptocurrency sector could establish its own collateral hierarchy independently of the traditional financial landscape, specifically the expansive $27 trillion U.S. Treasury market.
However, this assumption has quietly unraveled over the past 18 months. The emergence of tokenized U.S. Treasuries and money market funds now aggregates approximately $9 billion across 60 distinct offerings, encompassing over 57,000 holder addresses, with an average seven-day yield approaching 3.8%. Remarkably, this growth represents an increase of over fivefold during this period.
A broader examination of real-world asset (RWA) tokenization reveals that total tokenized RWAs on public blockchains approach $19 billion, with government securities and income products comprising a significant portion, as indicated by data from rwa.xyz. Within this context, Treasuries have assumed a pivotal role akin to their function in the $5 trillion U.S. repurchase agreement (repo) market, serving as the benchmark against which other assets are cleared.
This phenomenon transcends mere boutique experimentation. BlackRock’s BUIDL fund has escalated to nearly $3 billion in size and has been accepted as collateral on Binance, extending its reach to BNB Chain. Concurrently, Franklin Templeton’s BENJI token represents over $800 million within a U.S.-registered government money-market fund, with shareholder records meticulously maintained across seven distinct networks. Additionally, Circle’s USYC surpassed $1.3 billion in July 2025, bolstered by a partnership with Binance that enabled institutional investors to utilize the token as collateral for derivatives trading.
Furthermore, JPMorgan has introduced a tokenized money-market fund on Ethereum valued at $100 million, permitting qualified investors to subscribe and redeem using USDC. The infrastructure linking Wall Street custody to Ethereum settlement is not merely in conceptual stages but is actively in production.
Convergence of Traditional Finance and Blockchain Technology
The landscape of issuers within this burgeoning market reveals two competing paradigms regarding the evolution of crypto collateral.
BlackRock’s Institutional Liquidity Approach
BlackRock’s BUIDL functions as an institutional liquidity fund managed by Securitize, with custody and fund administration entrusted to Bank of New York Mellon. Shares represented by BUIDL tokens are invested in cash equivalents, U.S. Treasuries, and repurchase agreements (repos). Redemption processes are facilitated in USDC with a minimum threshold of $250,000 and no associated redemption fees, thereby positioning BUIDL firmly within the institutional domain. Its acceptance as collateral across centralized exchanges and extension to multiple blockchain platforms further solidifies its status as high-grade dollar-denominated collateral for crypto derivatives and basis trading.
Franklin Templeton’s Innovative Tokenization Model
In contrast, Franklin Templeton has adopted a distinctive approach with its OnChain U.S. Government Money Fund. This model involves tokenizing the shareholder registry itself: one share corresponds to one BENJI token, with transfer and record-keeping executed on-chain rather than within a conventional transfer agent database. This innovation posits that public blockchains can serve as primary record-keeping infrastructures for regulated securities, thus transcending their traditional role as mere secondary layers atop established systems.
Multichain Resilience and Institutional Integration
Janus Henderson’s Anemoy Treasury Fund and Ondo Finance’s OUSG are positioned at opposite ends of a third axis in this evolving landscape. Anemoy deploys tokens across Ethereum, Base, Arbitrum, and Celo networks while emphasizing multichain resilience; it has garnered an S&P rating focused on its tokenization architecture. Conversely, Ondo operates as a DeFi-native issuer collaborating with institutional backends through its OUSG product, which facilitates 24/7 minting and redemption in USDC or PayPal’s PYUSD—targeting qualified investors seeking exposure to Treasuries without departing from crypto-native frameworks.
The broader Ondo platform achieved a total value locked (TVL) of $1.4 billion by mid-2025, with approximately half attributed to tokenized Treasury products while simultaneously expanding its multichain capabilities.
Smaller issuers also contribute to this ecosystem’s composability tail; for example:
- Matrixdock’s STBT maintains a one-to-one peg with the dollar through daily interest rebasing backed by T-bills maturing within six months and reverse repos.
- OpenEden’s TBILL token has earned a Moody’s “A” rating and can be utilized as collateral across various DeFi protocols.
- On Solana alone, nearly $530 million of the $792 million in tokenized RWAs are attributable to U.S. Treasuries; Ondo’s USDY commands approximately $175 million while functioning akin to an interest-bearing stablecoin within Solana’s DeFi applications.
Redemption Mechanics: Limitations on Composability
The operational mechanics governing most tokenized Treasury products adhere to a common structural framework: A regulated fund or special-purpose vehicle retains short-dated U.S. government securities alongside repos under the custodianship of traditional entities such as BNY Mellon. A transfer agent or tokenization platform facilitates the minting of ERC-20 or equivalent tokens representing fund shares recorded on Ethereum or other layer-one blockchains.
While Franklin’s BENJI maintains shareholder records on-chain, both BUIDL and OpenEden’s TBILL align their securities custody and fund administration within traditional trust architectures while issuing tokens representing economic claims associated with these funds. Ondo’s OUSG provides instant 24/7 minting and redemption capabilities in USDC or PYUSD; however, tokens issued are fundamentally shares within a fund rather than freely tradable CUSIPs that could be redeemed for T-bills at the Federal Reserve.
This distinction imposes limitations on composability: Many tokens exist within allow-listed smart contracts accessible only by KYC-compliant wallets; some impose minimum redemption sizes within six-figure ranges. Consequently, full composability remains restricted largely to “KYC-DeFi” venues instead of broader public permissionless pools.
Despite these limitations, advancements in composability are occurring across two layers:
- Institutional Layer: Tokenized Treasury funds increasingly serve as margin collateral for over-the-counter derivatives trading—a trend highlighted by Financial Times reports indicating that tokenized Treasury and money-market funds facilitate continuous collateral movement unbound by traditional bank operating hours.
- DeFi Layer: Integration remains more fragmented but substantive nonetheless; OpenEden’s TBILL tokens can be utilized as collateral in DeFi lending protocols such as River while maintaining secondary liquidity across decentralized exchanges and RWA marketplaces.
The presence of Matrixdock’s STBT further exemplifies integration with RWA yield platforms offering approximately 5% annual percentage yield (APY) on short-term Treasuries alongside instant minting capabilities coordinated with stablecoins such as Ripple’s RLUSD.
The Intersection of Regulation and Systemic Risk
The regulatory environment surrounding tokenized Treasuries is inherently complex and revolves around three fundamental questions: Who is permitted to hold these tokens? Where are they officially registered? How do they intersect with existing stablecoin regulations? Most prominent issuers operate under recognized frameworks such as money-market funds or professional funds governed by extant securities laws—illustrated by BENJI/FOBXX being classified as a U.S.-registered government money-market fund.
OpenEden’s TBILL Fund operates under British Virgin Islands regulation overseen by the BVI Financial Services Commission while Janus Henderson’s Anemoy has secured an S&P rating centered on its innovative tokenization structure and controls. Regulatory frameworks like the EU’s Markets in Crypto-Assets directive and proposed U.S. stablecoin legislation explicitly reference tokenized Treasuries and money-market funds—thereby providing greater clarity for issuers regarding the encapsulation of government debt within tokens.
Nevertheless, much of this composability continues to reside within permissioned realms—primarily KYC-DeFi venues rather than widespread public permissionless platforms—thus constraining broader access to these innovations.
The Yield Cycle Versus Structural Transformation
The prevailing growth trajectory of tokenized Treasuries can be attributed to two primary forces: cyclical dynamics stemming from current interest rates coupled with structural shifts indicative of deeper transformations within financial markets.
Cyclical Dynamics: Interest Rate Environment
The rate environment between 2023 and 2025 has provided a significant impetus for growth; front-end U.S. yields have ranged from 4% to 5%, rendering tokenized T-bills an attractive alternative compared to zero-yield stablecoins—particularly appealing for market-making firms and decentralized autonomous organizations seeking avenues for idle cash allocation on-chain. Issuance escalated from approximately $1.3 billion at the beginning of 2024 to nearly $9 billion by December 15th—closely mirroring fluctuations in front-end rates.
Structural Dynamics: Long-Term Implications
An array of data points suggests that growth extends beyond mere opportunistic trading based on rate cycles; total tokenized RWAs on public chains have surpassed $18.5 billion—with government debt anchoring this expansion trajectory. Tokenized Treasury funds have become widely accepted collateral within crypto derivatives markets along with centralized exchanges targeting margin applications; institutions like JPMorgan are actively launching tokenized money-market funds on Ethereum designed explicitly to leverage continuous settlement capabilities alongside stablecoin infrastructures.
This indicates a paradigmatic shift where DeFi’s monetary base transitions from being exclusively crypto-centric towards integrating stablecoins alongside RWA-backed instruments—evidenced by MakerDAO and Frax increasingly relying upon Treasuries coupled with repos as foundational collateral assets.
Protocols such as Pendle harness these advancements through constructing on-chain rate curves referencing these instruments while Solana’s RWA landscape predominantly features Treasury-backed tokens functioning similarly to yield-bearing stablecoins across DeFi ecosystems.
The evolution of tokenized Treasuries positions them akin to crypto’s repo market—a foundational layer composed of dollar-denominated state-backed collateral against which various financial instruments including perpetual swaps, basis trades, stablecoin issuance mechanisms, along with prediction market margins will increasingly be benchmarked. The potential for today’s $9 billion market segment expanding into an $80 billion entity hinges upon regulatory frameworks and prevailing interest rates; nevertheless, it is evident that essential infrastructure is already operational across both Ethereum and Solana ecosystems. The critical inquiry now pertains not whether traditional financial collateral will migrate onto blockchain platforms but rather how expeditiously decentralized finance protocols will reconfigure themselves around this emerging paradigm.
