BlackRock’s BUIDL fund crossed $1 billion in on-chain assets within its first year of its March 2024 launch, faster than almost any tokenized product before it. While the broader market was fixated on meme coin cycles and L1 competition, tokenized real-world assets were quietly assembling one of crypto’s most credible product-market fits.

The pitch is not complicated. Hold US Treasury bills on a blockchain, earn the yield, and keep those assets usable inside DeFi. For protocol treasuries, DAOs, and institutions that already operate on-chain, it removes a persistent inefficiency: idle stablecoin balances earning nothing.

What Tokenized Treasuries Actually Are

A tokenized treasury product starts with a straightforward legal structure. A regulated entity (a fund manager or trust company) purchases US Treasury bills or money market instruments. It issues blockchain tokens representing fractional ownership of those assets. Token holders receive the accrued yield. The underlying securities sit with a qualified custodian, entirely off-chain.

The blockchain layer adds three things the traditional structure lacks: 24/7 settlement, programmability (so the tokens can serve as collateral in smart contracts), and a single wallet that holds both yield-bearing assets and other crypto positions.

This is not a new idea. What changed between 2022 and 2025 was the combination of elevated interest rates making yield meaningful again and an institutional infrastructure layer (compliant custodians, regulated issuers, on-chain transfer agents) that matured enough for major asset managers to participate.

The Main Products

BlackRock BUIDL is the highest-profile entry. Launched on Ethereum and managed in partnership with Securitize as transfer agent, BUIDL invests in cash, US Treasury bills, and repurchase agreements. It targets institutional investors and carries minimum investment requirements. Its importance is not just its assets under management: it is that a firm of BlackRock’s scale validated the format. BUIDL has since expanded to additional chains beyond Ethereum.

Franklin Templeton’s BENJI has the longest track record of the major products, having launched on Stellar in 2021 before expanding to Polygon. BENJI is registered with the SEC as a money market fund and represents shares of the Franklin OnChain US Government Money Fund. Franklin has maintained that on-chain record-keeping of fund shares is legally valid, a position it has quietly built toward regulatory acceptance over several years.

Ondo Finance took a different approach. Rather than operating as a fund manager, Ondo built DeFi-native wrappers around existing institutional products. OUSG gives on-chain holders exposure to BlackRock’s short-term Treasury ETF (SHV). USDY is a yield-bearing stablecoin backed by Treasuries and bank deposits, structured for non-US users who want dollar yield without the regulatory restrictions that apply to US money market products.

Ondo sits at the intersection of TradFi instruments and DeFi composability in a way that the direct fund products do not. OUSG can be used as collateral in DeFi lending protocols. That composability is what makes the on-chain format materially different from just buying a Treasury ETF in a brokerage account.

Why the Growth Happened Now

Three factors converged.

The interest rate environment created urgency. When risk-free Treasury yields were sitting above 4%, protocol treasuries and DAOs holding large USDC balances were leaving substantial yield on the table. The cost of inaction became visible in a way it had not been during the near-zero rate environment of 2020 to 2022.

DeFi infrastructure reached institutional legibility. The early versions of tokenized treasuries involved novel legal structures that institutional legal teams could not easily diligence. By 2024, the custody arrangements, transfer agent frameworks, and regulatory filings had been developed far enough that firms like BlackRock and Franklin Templeton could participate without creating unacceptable legal exposure.

On-chain institutional activity created genuine demand. As more institutional capital began operating on-chain - through ETF mechanics, custody products, and protocol participation - the need for on-chain cash equivalents grew. Holding yield-bearing assets that could serve as DeFi collateral became an operational need, not a speculative position.

The Risks

Smart contract risk is the most immediate. If a protocol distributing or integrating OUSG or USDY has a vulnerability, token holders can lose assets regardless of what the underlying Treasuries are doing. The token layer introduces risks that the underlying instrument does not carry.

Counterparty and custodian risk lives below the token layer. These products are only as good as the legal and custody structures holding the underlying securities. Regulated entities, but regulated entities fail. The 2022 period demonstrated that institutional-grade labelling does not guarantee institutional-grade risk management.

Regulatory risk is the largest unresolved variable. Most of these products have operated under existing securities frameworks, but comprehensive guidance on tokenized securities has not arrived. A shift in the SEC’s posture, a change in Treasury regulations, or a failed product that draws regulatory attention could affect the entire sector.

Stress-condition liquidity risk has not been tested at scale. Most tokenized treasury products have redemption mechanisms built for normal conditions. A scenario where a large DeFi protocol needs emergency liquidity and holds significant tokenized treasury exposure has not played out. The interaction between on-chain liquidity crises and off-chain redemption windows is an open question.

What It Means

Tokenized treasuries are not replacing stablecoins or DeFi lending as the dominant on-chain activity. They are doing something structurally different: introducing a credible, yield-bearing, near-risk-free primitive that on-chain balance sheets can hold.

The more consequential shift is not that institutions are buying Treasuries through a token. It is that on-chain balance sheets are starting to look like conventional balance sheets: cash equivalents, short-duration fixed income, and higher-risk positions, all managed in one place without moving assets between chains and custodians and exchanges.

That is a structural change in how capital allocators interact with crypto. Most coverage of the RWA sector focuses on the headline asset managers and the on-chain AUM numbers. The actual story is quieter: on-chain capital is becoming more sophisticated at managing itself.

This article is for informational purposes only and does not constitute financial advice.