Main Points：
- The market capitalization of tokenized U.S. Treasuries has surged to approximately $7.4 billion, offering yield-bearing alternatives to traditional money market funds.
- Moody’s warns that, beyond credit, interest rate, and liquidity risks, tokenized funds introduce novel technological and operational vulnerabilities.
- In June 2025, Deribit and Crypto.com became early adopters, accepting BlackRock’s $2.9 billion BUIDL fund as collateral for leveraged DeFi trades.
- The U.S. Treasury cautions that seamless on-chain ledgers could transmit volatility swiftly across markets during stress events.
- Institutional appetite is shifting toward tokenized hard assets—like gold and real estate—for diversification and cash-flow generation.
Introduction
Tokenization—the process of converting tangible assets into blockchain-based digital tokens—is reshaping capital markets by democratizing access, enhancing liquidity, and embedding programmable features into conventional instruments. Among the most notable developments is the tokenization of U.S. Treasuries, long regarded as the bedrock of global finance. In recent months, decentralized finance (DeFi) platforms have begun to use these on-chain Treasury tokens as collateral for leveraged trading, signaling both innovation and fresh risk vectors. This article delves into the emergence of tokenized Treasuries, the attendant risks identified by Moody’s and the U.S. Treasury, key market participants embracing the trend, and the evolving landscape of real-world asset (RWA) tokenization.
1. Tokenized U.S. Treasuries: A New On-Chain Safe Haven
What Is Tokenization?
Tokenization transforms real-world assets—here, government debt—into ERC-20 (or similar) tokens that represent fractional ownership. For U.S. Treasuries, this means individuals and institutions can buy, trade, and use on-chain claims to Treasury bills or notes around the clock, bypassing the constraints of legacy settlement cycles.
Market Growth
- The total market cap of tokenized U.S. Treasuries now stands at $7.4 billion, up from negligible figures only a year ago.
- These tokens function similarly to money market fund shares, providing a yield based on the underlying Treasury interest and cash holdings.
2. Emerging Risk Vectors
Traditional Risks
Moody’s, in a June 2025 report, underscores that tokenized short-term liquidity funds mirror the credit, interest rate, and liquidity risks of their traditional counterparts. However, they are not risk-free.
New Technological and Operational Risks
- Smart Contract Vulnerabilities: Bugs or exploits in token issuance or redemption contracts could cause significant losses.
- Cybersecurity Threats: Public, permissionless blockchains remain targets for hacks.
- Operational Dependencies: Custodian or issuer insolvency could break the on-chain peg to Treasury values.
Systemic Contagion
The U.S. Treasury warned the Treasury Borrowing Advisory Committee that tokenization could act as a conduit for volatility to ripple swiftly across markets, particularly during stress events when automated deleveraging or fire sales occur.
3. Institutional Adoption and Collateral Use
Exchange Integrations
In June 2025, leading crypto exchanges Deribit and Crypto.com began accepting BlackRock’s $2.9 billion BUIDL fund—a tokenized money market instrument issued via Securitize—as collateral for leveraged trades. This move underscores growing institutional comfort with on-chain liquidity sources.
<details> <summary>View Chart: Tokenized Assets Values</summary>
The bar chart above compares the current market capitalization of tokenized U.S. Treasuries ($7.4 billion) with the total value locked in BlackRock’s BUIDL fund ($2.9 billion). </details>
DeFi Protocol Integrations
Beyond centralized exchanges, DeFi platforms such as Euler and Frax Finance have proposed or implemented mechanisms to use tokenized Treasuries as collateral for lending, stablecoin backing, and yield strategies. This composability exemplifies DeFi’s promise of capital efficiency.
4. Regulatory and Policy Perspectives
U.S. Treasury Caution
In its presentation to TBAC, the U.S. Treasury highlighted that while tokenization can improve settlement speed and inclusivity, it requires rigorous risk study. In stress scenarios, frictionless on-chain ledgers might amplify deleveraging across assets.
Moody’s Recommendations
Moody’s advises:
- Enhanced auditing of smart contracts and custodial arrangements.
- Stress testing for automated liquidations tied to price oracles.
- Transparency and standardized disclosures from token issuers.
5. Beyond Treasuries: The Next Frontier
Hard Asset Tokenization
Industry leaders predict that tokenization will expand into gold, real estate, and energy-linked commodities. According to Kevin Rusher of RAAC, real estate tokens could combine yield with the intrinsic value of property, while tokenized gold can serve both as collateral in DeFi loans and as an interest-bearing asset through lending platforms.
Diversification Imperative
Nick Jones, founder of Zumo, emphasizes that robust risk management, heightened regulation, and transparency are essential as traditional finance converges with DeFi.
6. Market Outlook and Opportunities
Structural Demand for Treasuries
As stablecoins and tokenized funds mature, structural demand for short-dated Treasuries may rise, potentially prompting Treasury issuance strategies to favor T-bills to meet on-chain safe-haven needs.
Yield Optimization
Investors can earn Treasury yields while engaging in crypto strategies, effectively layering yield generation on top of conventional debt returns, enhancing portfolio efficiencies.
Conclusion
The tokenization of U.S. Treasuries marks a pivotal juncture in integrating traditional finance with blockchain innovation. While the $7.4 billion on-chain Treasury market and $2.9 billion BlackRock BUIDL collateral adoption signal institutional momentum, significant risks—technological, operational, and systemic—require robust governance frameworks. As tokenization spreads to hard assets like gold and real estate, stakeholders must balance innovation with prudence, ensuring transparency, rigorous risk controls, and proactive regulation guide this transformative evolution in global finance.
