The tokenized U.S. Treasuries market, now the largest class of real-world assets (RWA) after stablecoins, has reached a total market cap of $8.6 billion as of late October, up from $7.4 billion in mid-September. This growth is driven by a shift from passive yield generation to active use as collateral for trading, credit, and repo transactions. Key players include BlackRock's BUIDL fund at approximately $2.85 billion, followed by Circle's USYC at $866 million and Franklin Templeton's BENJI at $865 million, with Fidelity's newly launched tokenized money-market fund rising to $232 million.
Institutional adoption is accelerating, with exchanges like Crypto.com, Deribit, and Bybit approving tokenized funds such as BUIDL and QCDT as collateral, allowing professional clients to earn underlying yield while maintaining trading exposure. In traditional banking, DBS became the first to test tokenized funds actively, making Franklin Templeton's sgBENJI available for trading and lending on its digital exchange alongside Ripple's RLUSD stablecoin, and piloting its use in repo and credit collateral.
Infrastructure advancements are supporting this growth, with Chainlink and Swift completing a pilot that uses standard ISO 20022 messages to process subscriptions and redemptions for tokenized funds, enhancing interoperability between banks and blockchain systems. This allows tokenized assets to integrate into existing financial workflows, though regulatory hurdles and operational risks persist, such as margin discounts of around 10% on exchanges due to liquidity and settlement delays.
However, the industry faces criticism over inflated metrics and lack of transparency. Aishwary Gupta of Polygon Labs argues that many RWA announcements involve 'smoke and mirrors', eroding institutional trust. Examples like the SEC charging Unicoin for misleading tokenized real estate deals highlight the need for verifiable adoption, with legitimate projects including Wyoming's state-backed stablecoin FRNT and Japan's JPYC, which solve real payment problems and have auditable reserves.
Looking ahead, the U.S. CFTC's Tokenized Collateral and Stablecoins Initiative, launched on September 23, aims to transition tokenized Treasuries from pilots to production-level tools, potentially bridging bank balance sheets, stablecoin liquidity, and onchain finance. As the market diversifies beyond dominant funds like BUIDL, which holds about 33% of the market, increased liquidity and collateral acceptance are expected to narrow operational discounts toward traditional norms.
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