Tokenized Treasuries cross $8.6B as banks and exchanges push collateral use

From performance to collateral: the $8.6 billion tipping point

Tokenized United States Treasuries, the largest real world asset class (RWA) after stablecoins, have entered a new phase. Tokenized money market funds (MMFs), which pool cash in short-term US government securities, move from passive yield to collateral for trade, credit and repo transactions.

At the end of October, the entire market of Treasuries tokenized arrived $8.6 billion, up from $7.4 billion in mid-September. The increase was driven by BUIDL by BlackRockwhich reached about $2.85 billion, followed by Circle’s USYC at $866 million and BENJI by Franklin Templeton to $865 million. Fidelity just launched The tokenized MMF also showed impressive growth and rose to $232 million.

Institutional adoption: Exchanges, banks and custodians intervene

Digital representations of Treasuries are beginning to go through the same clearing and margining systems that underpin traditional collateral markets. The first practical test of fund-as-collateral came in June, when BUIDL was approved on Crypto.com and Deribit. At the end of September, Bybit extended the concept, announcing that it will accept QCDT, a DFSA-approved tokenized money market fund backed by US Treasuries, as collateral. The token can be published by professional clients on the trading platform of the exchange in place of cash or stablecoins. This allows them to earn the underlying yield from the Treasury fund and maintain commercial exposure.

In traditional banking, DBS became the first to move towards actively testing tokenized funds. The Singapore lender confirmed which will make Franklin Templeton’s sgBENJI, which is the onchain version of his US Government Fund Money, available for trading and lending on the DBS Digital Exchange, along with Ripple’s RLUSD stablecoin. The bank is also running pilot transactions to use sgBENJI as a repo and credit guarantor. The project transforms tokenized money market funds from a passive investment into a working part of the bank’s financing infrastructure.

Infrastructure and messaging: The hidden engine of tokenized finance

The infrastructure that connects banks and blockchain systems has also advanced. Chainlink and Swift, working with UBS Tokenize, carry out a pilot that processed subscriptions and redemptions for a tokenized fund using ISO 20022 standard messages. In simple terms, the test showed that the same message format that banks already use to settle titles and payments can now enable smart-contract actions in a blockchain.

The pilot marks a clear step towards interoperability. Until now, tokenized funds have existed in separate digital systems that required custom links to connect with banks. Using ISO 20022 as the message format gives both sides a common language. It allows custodians and fund managers to move tokenized assets through the same settlement and reporting processes already used for traditional securities.

For investors and institutions, this means that tokenized Treasuries are starting to fit into the normal financial workflow rather than sitting aside as a crypto experiment.

Market composition and frictions

The market is still led by a number of large funds, but it is slowly diversifying. BUIDL by BlackRock always hold the largest share of the market at about 33% of the total tokenized Treasuries. Franklin Templeton’s BENJI, Ondo’s OUSG and Circle’s USYC account for about 9% to 10%.

A quick look at the table below shows how this balance is beginning to shift. The space once dominated almost entirely by one instrument now has several regulated administrators that share significant market share. This distribution spreads liquidity and makes accepting collateral more practical for venues and banks that prefer diversified exposure.

Where tokenized Treasuries still encounter friction is not on the demand side, but through regulatory obstacles. Most funds are open only to Qualified Buyers under US securities law, typically institutions or high net worth individuals (HNWI).

Cut-off times are another subtle but important limitation. Like traditional money market funds, tokenized versions only allow redemptions and new subscriptions at specific times of the day. During periods of heavy redemptions or liquidity stress, this schedule may delay withdrawals or liquidity injections. This makes them behave less like 24/7 crypto assets and more like traditional funds.

Tokenized funds still trade on less liquid markets and depend on blockchain settlement cycles. Therefore, the exchanges tend to discount their published value more heavily than they would have done with the conventional Treasury. For example, places like Deribit to apply margin reductions of around 10%. Treasuries in traditional repo markets, instead, only bring haircuts of about 2%.

The difference reflects operational rather than credit risk, such as delays in redemption, onchain transfer finality and lower secondary market liquidity. As tokenized Treasuries mature and reporting standards tighten, these discounts are expected to narrow toward conventional money market standards.

Outlook: From pilots to production

The next quarter will be about connecting the pilots mentioned in this article. The repo tests from the DBS, experiments from exchanges and the Swift x Chainlink The ISO 20022 integration points to the routine use of intraday collateral.

On the regulatory front, the CFTC US started its Tokenized Collateral and Stablecoins Initiative on September 23. If these consultations and repo programs progress, the tokenized Treasuries will move from pilot projects to production tools. They will function as an active layer of the global collateral stack, bridging bank balance sheets, stablecoin liquidity and onchain finance.

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