The market value of tokenized U.S. Treasuries this week surpassed the $5 billion for the first time, rwa.xyz data shows, as demand for blockchain-based real-world assets (RWAs) accelerates.
The asset class grew by $1 billion through just two weeks, led by inflows into asset management giant BlackRock’s and digital asset firm Securitize’s market leading BUIDL.
Crypto tokens backed by U.S. Treasuries are at the forefront of the tokenization trend, which have captivated a host of global financial behemoths and digital asset firms. Fidelity Investments is the latest large U.S. asset manager seeking to create a tokenized money market fund, filing for regulatory approval last week to launch its Fidelity Treasury Digital Liquidity on the Ethereum blockchain.
“We see promise in tokenization and its ability to be transformative to the financial services industry by driving transactional efficiencies with access and allocation of capital across markets,” Cynthia Lo Bessette, head of Fidelity Digital Asset Management, told CoinDesk in a statement.
Tokenized Treasuries allow investors to park idle cash on blockchains to earn a yield — like with a money market fund. Increasingly, they are also used as a reserve asset for decentralized finance (DeFi) protocols. Another use case with significant potential is using these tokens as collateral in trading and asset management.
“In looking at use-cases, posting a tokenized asset as non-cash collateral to satisfy margin requirements could improve operational infrastructures and enhance capital efficiency,” she added.
Her words echo Donna Milrod’s, chief product officer of State Street, another Boston-based asset management and banking giant that is exploring tokenization of bonds and money market funds. She said in an earlier interview that collateral tokens could have helped avoid or alleviate, for example, the “liability-driven” crisis in 2022, allowing pension funds and asset managers to use money market fund tokens for margin calls instead of liquidating their assets to raise cash.
The growth trend won’t stop anytime soon.
Securitize said earlier today that BUIDL is on track to surpass $2 billion in assets by early April from $1.7 billion currently. Meanwhile, Spark, the ecosystem partner of DAI stablecoin issuer Sky (formerly MakerDAO), plans to allocate $1 billion to BUIDL, Superstate’s USTB and Centrifuge’s fund managed with Anemoy and Janus Henderson.