Tokenized Treasuries Surpass $8.6B as Banks and Exchanges Boost Collateral Use

Blockchain-based tokenization of U.S. Treasuries has reached a new milestone, signaling a shift in how real-world assets (RWA) are integrated into digital finance. Once primarily used for passive yield generation, tokenized Treasury funds are now evolving into collateral for trading, lending, and repo activities — a development that bridges traditional finance and blockchain technology. This transition marks an important step toward more seamless and regulated crypto markets, with institutional players actively adopting tokenized assets.

From yield to collateral: The $8.6 billion turning point

Tokenized U.S. Treasuries have entered a new phase, with their total market capitalization reaching over $8.6 billion by late October, up from $7.4 billion just a month earlier. After initially serving as passive yield-generating assets, these tokenized money-market funds (MMFs) are now being harnessed as collateral for trading, credit, and repo transactions — signaling growing maturity within the crypto and traditional finance sectors.

The rise has been driven by major players including BlackRock’s BUIDL, which has grown to approximately $2.85 billion, followed by Circle’s USYC at $866 million and Franklin Templeton’s BENJI at $865 million. Fidelity’s newly launched tokenized MMF has also contributed significantly, reaching $232 million, reflecting increasing institutional trust and adoption.

Institutional adoption: Exchanges, banks and custodians step in

Tokenized Treasuries are beginning to move through existing settlement and margin systems that support traditional collateral markets. The first practical demonstrations of fund-as-collateral were realized in June when BUIDL was approved for use on Crypto.com and Deribit. By September, Bybit expanded this capability by accepting QCDT — a tokenized money-market fund backed by U.S. Treasuries approved by the Dubai Financial Services Authority (DFSA) — as collateral on its platform. This allows professional traders to post these tokens instead of cash or stablecoins, while earning underlying yields and maintaining market exposure.

Meanwhile, in banking, Singapore’s DBS is actively testing tokenized funds. The bank confirmed plans to support Franklin Templeton’s sgBENJI, an on-chain version of its U.S. Government Money Fund, on its digital exchange. The bank is running pilot transactions for repo and credit collateral with these tokens and Ripple’s RLUSD stablecoin, integrating tokenized funds into its financing infrastructure.

Infrastructure and messaging: The hidden engine of tokenized finance

Advances in blockchain infrastructure are facilitating interoperability with traditional banking systems. Partnering with UBS Tokenize, Chainlink and Swift completed a pilot that used the ISO 20022 messaging standard— the same system banks employ for securities settlement — to process subscriptions and redemptions of tokenized funds. This development enables tokenized assets to seamlessly blend into existing financial workflows, moving beyond siloed digital systems.

For investors, this means tokenized Treasuries are becoming more integrated into routine financial operations rather than experimental crypto assets, paving the way for broader acceptance and use.

Market composition and frictions

While the market remains concentrated among a few large funds, diversification is gaining momentum. BlackRock’s BUIDL leads with roughly 33% market share, but others like Franklin Templeton’s BENJI, Ondo’s OUSG, and Circle’s USYC each hold about 9–10%. This distribution helps spread liquidity and enhances collateral acceptance across different venues and institutions.

However, regulatory hurdles continue to limit broader participation. Most tokenized funds are restricted to qualified purchasers — mainly institutional investors and high-net-worth individuals — under U.S. securities laws. Additionally, operational limitations like cut-off times and liquidity stress can cause delays similar to traditional funds, reducing their perceived liquidity and value in secondary markets. Exchanges such as Deribit still apply margin discounts of around 10%, compared to just 2% in traditional repo markets, reflecting operational risks rather than credit concerns.

Outlook: From pilots to production

In the coming months, ongoing projects aim to connect existing pilot programs into operational systems, with a focus on routine collateral activities. Initiatives like the Swift-Chainlink partnership and experiments by banks like DBS point toward real-time, intraday collateral management based on tokenized Treasuries.

Regulatory developments, such as the U.S. Commodity Futures Trading Commission’s (CFTC) Tokenized Collateral and Stablecoins Initiative, could accelerate the transition from experimental deployment to a fully integrated layer of the global collateral ecosystem. As these innovations mature, tokenized Treasuries are poised to become vital components of onchain finance, bridging traditional banking infrastructure with the evolving landscape of cryptocurrency markets.