Tokenised Treasuries and Money Market Funds

Why Tokenised Treasuries Emerged

The context for tokenised treasury products: throughout 2022–2025, the US Federal Reserve raised interest rates aggressively, pushing the risk-free rate (the yield on short-duration US government debt) from near zero to 4.25–5.5%. At the same time, the DeFi ecosystem — which had previously offered 5–20% yields on stablecoins through liquidity mining incentives — saw those yields collapse as the liquidity mining boom ended and sustainable on-chain yield became scarce.

The result: for the first time since DeFi's inception, the risk-free rate in traditional finance exceeded available yields in DeFi's most conservative instruments (stablecoin lending on Aave/Compound yielded 2–4%). Billions of dollars in crypto-native capital had an obvious destination: US T-bills. But accessing T-bills requires a bank account, brokerage account, or money market fund — infrastructure many crypto-native participants lack or prefer not to use. Tokenised treasury funds solved this: bringing T-bill yields on-chain where they could be accessed by wallet-only investors and composed into DeFi applications.

BlackRock BUIDL: The Institutional Standard

BlackRock USD Institutional Digital Liquidity Fund (BUIDL) is the tokenised money market fund that most clearly validated institutional adoption of on-chain treasury products. Launched in March 2024 on Ethereum in partnership with Securitize (the digital securities transfer agent and compliance infrastructure provider), BUIDL reached $500 million AUM within weeks — the fastest growth of any tokenised fund product to date.

What BUIDL holds: 100% US cash, US Treasury bills, and repurchase agreements collateralised by US government securities. The fund targets the Fed Funds rate equivalent yield, distributed daily as additional BUIDL tokens to existing holders (accumulating, not separate cash distributions). Shares are valued at $1.00 each at all times — a stable NAV structure, making BUIDL functionally similar to a traditional institutional money market fund but with blockchain token representation.

Access requirements: BUIDL is restricted to qualified purchasers (minimum $5 million investment) — institutional only. Retail access to BUIDL's yield is available indirectly through Ondo Finance's OUSG product, which invests in BUIDL and issues ERC-20 OUSG tokens accessible at lower minimums to accredited investors. The institutional restriction reflects current US securities law — money market fund shares are securities, and distribution requires compliance with securities regulations.

Significance: BlackRock's entry into tokenised funds is the single most important institutional validation of RWA tokenisation. When the world's largest asset manager ($10+ trillion AUM) chooses to build on Ethereum, it signals to the broader financial industry that blockchain-based fund infrastructure is a strategic direction worth investing in — accelerating competitor and regulatory response.

Franklin Templeton BENJI

Franklin Templeton launched its OnChain US Government Money Fund (BENJI) in 2021 — predating the institutional RWA wave by several years and establishing the first tokenised fund registered with the SEC to hold the fund's official record of ownership on a public blockchain. BENJI is available on Stellar, Polygon, and several other chains. Unlike BUIDL's institutional-only structure, BENJI has a $20 minimum investment — making it among the most accessible regulated tokenised treasury products for retail investors, though limited to US persons meeting fund registration requirements.

BENJI's multi-chain deployment strategy distinguishes it from BUIDL's Ethereum focus — Franklin Templeton has explicitly prioritised accessibility and chain diversity, with BENJI serving as both a financial product and a proof of concept for how traditional asset management can operate natively on public blockchains.

Ondo Finance: The DeFi Access Layer

Ondo Finance has built the most DeFi-integrated tokenised treasury product suite. Key products:

USDY (Ondo US Dollar Yield): A yield-bearing stablecoin-like instrument backed by short-duration US Treasuries and bank demand deposits. USDY tokens accrue yield daily and can be used as collateral in DeFi protocols — effectively replacing non-yielding stablecoins (USDC, USDT) with a yield-bearing alternative in DeFi strategies. Available to non-US persons (KYC required).

OUSG: Ondo's tokenised access to BlackRock's BUIDL fund, wrapped with DeFi compatibility and accessible at lower minimums than BUIDL's $5M institutional threshold. OUSG is whitelisted for use as collateral on Flux Finance (Ondo's companion lending protocol), allowing OUSG holders to borrow stablecoins against their T-bill position — combining T-bill yield with DeFi leverage.

Ondo's ONDO governance token launched via airdrop in January 2024, creating a community of stakeholders participating in the protocol's governance and future product development. ONDO quickly became one of the most widely held RWA sector tokens, reflecting market enthusiasm for the tokenised treasury narrative.

Comparing Tokenised Treasury Products

Risks of Tokenised Treasury Products

Despite holding highly safe underlying assets (US government securities), tokenised treasury products carry distinct risks:

• Issuer/custodian risk: The issuer must maintain accurate records of underlying asset holdings. If the issuer's operational infrastructure fails or the company becomes insolvent, recovering the underlying assets may require legal processes.
• Smart contract risk: The token contract itself could contain vulnerabilities. Using reputable, audited platforms reduces but does not eliminate this risk.
• Regulatory risk: US securities regulations apply to tokenised fund shares. Regulatory changes could affect product availability, transfer restrictions, or KYC requirements.
• Interest rate risk: When the Fed cuts rates, yields on these products decline. In a low-rate environment, tokenised treasuries may yield less than some DeFi alternatives, reducing their relative attractiveness.

Summary

Tokenised treasuries and money market funds represent the most successful and institutionally validated category of RWA tokenisation to date — bringing the US risk-free rate on-chain with blockchain's efficiency advantages. From BlackRock's institutional BUIDL fund to Ondo's DeFi-integrated USDY, the product landscape has diversified to serve investors from $20 retail minimums to $5M institutional minimums. As interest rates normalise and DeFi yields recover, the relative attractiveness of tokenised treasury yields will fluctuate — but the structural innovation (yield-bearing on-chain dollar exposure with DeFi composability) has been established as a permanent feature of the crypto financial landscape, with institutional participation and regulatory frameworks maturing rapidly.