Tokenized Treasury Bills: How to Invest in On-Chain Government Debt in 2026

Forget NFTs. The Killer App for Crypto Is Government Debt.

T-bills on a blockchain. Sounds weird. It's actually the most boring — and most successful — crypto use case ever built. While the crypto industry spent years chasing NFT profile pictures and meme coins, a quieter revolution was happening in the background: the tokenization of US government debt. And it worked.

The numbers tell the story. At the start of 2024, tokenized Treasury products held roughly $800 million in assets. By the end of 2025, that figure had crossed $9 billion. Projections from Standard Chartered, Citi, and Boston Consulting Group peg the market at $14–$16 billion by end of 2026, and some estimates go far higher. We've been watching this market closely since the first products launched, and the growth trajectory has consistently outpaced even the bullish forecasts.

What makes this different from every other crypto narrative? Simple: the underlying asset is US government debt. Not a JPEG. Not a governance token with circular value. Actual Treasury bills, held by actual custodians, earning actual yield that the US government pays. The blockchain is just the delivery mechanism — faster, cheaper, and more accessible than the traditional settlement infrastructure built in the 1970s.

And who's building this? BlackRock (yes, BlackRock is doing crypto now — and they're winning). Franklin Templeton. Ondo Finance. Backed Finance. These are not anonymous DeFi developers. The largest asset manager on Earth launched a tokenized Treasury fund, and it crossed $2 billion in AUM faster than almost any fund in the firm's history. That tells you everything about where institutional conviction sits.

How Tokenized Treasuries Actually Work (Without the Jargon)

Strip away the blockchain buzzwords, and the mechanics are straightforward. A fund manager — say BlackRock — buys US Treasury bills through normal channels. Those T-bills sit in a segregated account at a qualified custodian (Bank of New York Mellon, in BUIDL's case). A tokenization platform (Securitize for BUIDL) then issues digital tokens on a blockchain, typically Ethereum. Each token represents a share in the fund, backed 1:1 by the underlying Treasuries. Yield accrues daily and is either embedded in the token price (rebasing) or distributed periodically.

That's it. There's no alchemy here. The innovation is in the wrapper, not the asset. But the wrapper matters more than people realize.

The Settlement Advantage

Traditional Treasury settlement runs on T+1 — buy today, receive securities tomorrow, during business hours only. Tokenized Treasuries settle in minutes, any hour of any day. A crypto treasury manager who needs to park $10 million in safe yield at 2 AM on a Sunday can mint BUIDL tokens and start earning 4.8% immediately. Try doing that with a Schwab money market fund.

Fractional Access

A single Treasury bill has a $100 face value at auction, and most brokerage accounts require $1,000 minimums. Tokenized products blow that open. Franklin Templeton's BENJI lets you invest as little as $20 through their app. Ondo's USDY can be acquired in fractional amounts through DeFi protocols. This matters enormously for global investors who previously had no practical access to US government debt.

DeFi Composability

This is where things get genuinely novel. Because tokenized Treasuries exist as blockchain tokens, they can be used as collateral in lending protocols, as backing for stablecoin issuance, or as margin for on-chain derivatives. MakerDAO now holds over $2 billion in RWA collateral, much of it tokenized Treasuries. Aave and Morpho allow BUIDL and USDY as collateral for borrowing. You can earn 4.8% on your Treasury tokens and simultaneously use them to borrow USDC at 3% — a positive carry trade that simply does not exist in traditional markets.

The Product Landscape: Who's Winning and Why

Four products dominate the tokenized Treasury market, and each serves a distinct audience. BUIDL is the institutional standard. Ondo is the DeFi play. BENJI is the retail on-ramp. bIB01 is the European access point. Pick your lane.

BlackRock BUIDL — $2B+ AUM

The USD Institutional Digital Liquidity Fund (BUIDL) launched in March 2024 and has become the 800-pound gorilla in this space. Issued as ERC-20 tokens on Ethereum through Securitize, BUIDL invests in short-duration T-bills and repo agreements. Each token targets a $1.00 NAV with yield accruing daily and distributing monthly. The fund crossed $2 billion in AUM by late 2025, making it the largest tokenized Treasury product by a wide margin.

The catch: BUIDL requires a $5 million minimum investment and is restricted to qualified purchasers. This is explicitly an institutional product. But its significance extends beyond its own AUM. BUIDL has become the benchmark that other tokenized Treasury products are measured against, and BlackRock's imprimatur gave the entire category credibility that no crypto-native issuer could have provided on its own. Since launch, BUIDL has expanded to Solana, Polygon, Arbitrum, Optimism, and Avalanche — signaling BlackRock's commitment to multi-chain distribution.

Ondo Finance USDY — $800M+ AUM

Ondo occupies a different niche. USDY is a tokenized note backed by short-duration US Treasuries and bank demand deposits, offering approximately 4.5% APY. Unlike BUIDL, USDY is designed for DeFi composability first. It's available on Ethereum, Solana, Mantle, Sui, and multiple other chains. Ondo also offers OUSG (tokenized short-term US government bond fund) for accredited investors with lower minimums than BUIDL.

Ondo's advantage is distribution across DeFi. USDY is integrated into lending protocols, DEXs, and yield aggregators where crypto-native users already operate. If BUIDL is the Goldman Sachs of tokenized Treasuries, Ondo is the Robinhood — lower barriers, wider reach, built for a different user. Ondo raised $34 million in Series A funding from Pantera Capital, Coinbase Ventures, and Tiger Global, and the ONDO governance token trades publicly (though we would note the token is a governance instrument, not a direct claim on Treasury yield).

Franklin Templeton BENJI — $500M+ AUM

Franklin Templeton was actually ahead of BlackRock in this space. The Franklin OnChain US Government Money Fund launched on the Stellar blockchain in 2021 and later expanded to Polygon and Ethereum. The fund — branded as BENJI and accessible through the Benji Investments app — invests in US government securities and holds over $500 million in AUM.

BENJI's differentiator is accessibility. It is a registered 40 Act fund — meaning it is regulated under the same framework as a traditional mutual fund — with minimums as low as $20. For a retail investor who wants T-bill yield on a blockchain without navigating the complexity of DeFi, BENJI is the most straightforward option available from a major asset manager. The trade-off: BENJI has less DeFi integration than BUIDL or USDY, so it does not offer the composability benefits that crypto-native investors value.

Backed Finance bIB01 — European Access

Backed Finance issues bIB01, a tokenized tracker of the iShares $ Treasury Bond 0-1yr UCITS ETF. Structured as a fully-collateralized bearer instrument under Swiss law, bIB01 provides European and non-US investors access to short-duration US Treasury exposure on-chain. It trades on Ethereum and is integrated into several European DeFi protocols. For investors outside the US who cannot easily access BUIDL or BENJI, bIB01 fills a geographic gap.

Who Is Actually Buying This Stuff?

Three buyer profiles dominate the market, and understanding each explains why tokenized Treasuries are growing so fast.

Crypto Treasuries and DAOs

Decentralized autonomous organizations (DAOs) and crypto project treasuries collectively hold billions of dollars in stablecoins. For years, that capital sat idle, earning nothing. Tokenized Treasuries solved the problem: a DAO treasury can hold USDY or BUIDL and earn 4.5%+ on its reserves while remaining on-chain and liquid. MakerDAO was the pioneer here, allocating over $2 billion of its reserves to real-world assets including tokenized Treasuries. Other protocols followed. When a DeFi project with $500 million in its treasury can earn $22.5 million per year just by holding tokenized T-bills instead of USDC, the decision is obvious.

Institutional Stablecoin Reserves

Institutions that hold large stablecoin positions for trading, settlement, or operational purposes are rotating a portion of those holdings into tokenized Treasuries. The logic: if you are going to hold $50 million in dollar-denominated digital assets anyway, you might as well earn the risk-free rate. Crypto exchanges, market makers, and payment processors are the primary buyers in this category. Some are using BUIDL as a more productive alternative to holding raw USDC — same dollar stability, but with embedded yield.

Retail Yield Seekers

The smallest segment by AUM but the fastest growing. Retail investors — particularly outside the US — are discovering that tokenized Treasuries provide access to US government yields without a US brokerage account. A retail investor in Southeast Asia who previously had no practical way to buy T-bills can now acquire USDY on Solana in minutes. Franklin Templeton's $20 minimum for BENJI is explicitly targeting this demographic. As on-chain user interfaces improve and regulatory access broadens, retail adoption will accelerate.

Tokenized Treasuries vs. Money Market Funds vs. Stablecoins

The real question most investors should ask is not “are tokenized Treasuries interesting?” but “are they better than what I already have?” That depends on who you are.

Our honest assessment: if you are a US-based investor with a traditional brokerage account and no interest in DeFi, a money market fund is still the simplest and safest choice for T-bill yield. The regulatory protections are stronger, the track record is longer, and you avoid smart contract risk entirely.

But if you are a crypto-native user sitting on idle stablecoins, a DAO treasury manager, an institutional market maker, or a non-US investor seeking dollar-denominated yield — tokenized Treasuries are genuinely superior to the alternatives. The yield advantage over stablecoins alone is a $9+ billion annual revenue pool at current market size and rates. That number keeps growing.

Regulatory Clarity Is Improving — But It's Not Complete

The regulatory environment for tokenized Treasuries has improved materially over the past 18 months. The SEC's posture under the current administration has shifted from hostility to cautious engagement. Several developments stand out.

The OCC issued guidance in late 2024 clarifying that national banks can custody tokenized securities and participate in blockchain-based settlement networks. This removed a significant compliance barrier for bank-affiliated custody providers. The SEC has granted no-action relief for certain tokenized fund structures, allowing products like BENJI to operate as registered funds with blockchain-based share recording. And the passage of the Stablecoin Payment Clarity Act in 2025, while focused on stablecoins specifically, established a regulatory precedent for tokenized dollar-denominated instruments that benefits the broader tokenization ecosystem.

In Europe, MiCA (Markets in Crypto-Assets) has been fully effective since January 2025, providing a clear regulatory framework for tokenized financial instruments. This has accelerated European tokenization relative to the US market, which still relies on a patchwork of existing securities exemptions (Reg D, Reg S, Rule 144A) rather than a bespoke framework.

What is still missing: a unified US federal framework for tokenized securities that goes beyond the stablecoin bill. The SEC has signaled interest in modernizing settlement infrastructure to accommodate blockchain-based systems, but formal rulemaking is likely 12–24 months away. Until that arrives, the regulatory picture is “better but not settled” — which is enough for institutional adoption but keeps some risk-averse allocators on the sidelines.

The Risks — And We Are Not Sugarcoating Them

We are bullish on the tokenized Treasury category. But this article would be irresponsible without a clear-eyed risk assessment. Tokenized Treasuries are not the same thing as holding T-bills directly. Here is what can go wrong.

Smart Contract Risk

Every tokenized Treasury product relies on smart contract code to mint, transfer, and redeem tokens. A critical bug could freeze redemptions, misallocate yield, or create tokens unbacked by underlying assets. Major products have undergone multiple audits (Securitize uses Trail of Bits, OpenZeppelin, and others), but audits are not guarantees. The DeFi industry has lost billions to smart contract exploits. The probability is low for well-audited institutional products, but it is not zero.

Custodial and Counterparty Risk

You are trusting the issuer and custodian to actually hold segregated Treasuries backing your tokens. For BUIDL, the custodian is BNY Mellon — about as safe as it gets. For smaller tokenization platforms, the custodial chain may be less transparent. The collapse of FTX demonstrated that “your tokens are backed by real assets” means nothing if the entity holding those assets is fraudulent or insolvent. Due diligence on custodial structure is non-negotiable.

Regulatory Reversal

The current US regulatory environment is favorable, but administrations change. A future SEC that takes an aggressive stance on tokenized securities could restrict access, impose onerous reporting requirements, or challenge the exemptions under which current products operate. We view this as a tail risk rather than a base case — the institutional momentum (BlackRock, Franklin Templeton) makes a complete reversal politically difficult — but it is worth monitoring.

Liquidity in Stress

Tokenized Treasury products offer redemption mechanisms, but redemption speed varies. BUIDL offers same-day redemption for qualified investors through Securitize. USDY has a multi-day redemption window. In a market stress scenario — think March 2020 or March 2023 — the gap between “tokens trade 24/7” and “you can actually get your cash back” could widen. Traditional money market funds experienced redemption pressures during COVID; tokenized products have not yet been tested in a genuine liquidity crisis. We do not know how they will perform under stress, and anyone who claims they do is selling something.

Yield Compression

The entire value proposition of tokenized Treasuries rests on T-bill yields being attractive enough to justify the tokenization overhead. At 4.5%, the product is compelling. At 1.5% (where rates sat from 2009–2021), the yield barely covers platform fees. If the Fed cuts aggressively in a recession, the demand for tokenized Treasury products would decline materially. This is not a structural flaw — it affects all T-bill products equally — but it means the 2025–2026 growth trajectory is partly a function of the rate environment, not just tokenization innovation.

Our Take: Where This Goes from Here

We've been writing about real-world asset tokenization and stablecoins for over a year now, and the tokenized Treasury subcategory has consistently outperformed our projections. The $9 billion in AUM today represents maybe 0.1% of the $7.5 trillion US money market fund industry. The upside is enormous if even a small fraction of that capital migrates on-chain.

The catalysts for the next leg of growth are clear: a dedicated US regulatory framework for tokenized securities (likely 2026–2027), broader DeFi integration that makes tokenized Treasuries as liquid and universally accepted as stablecoins, and the continued expansion of institutional products to retail-accessible wrappers. We also expect to see tokenized Treasury products integrated into traditional brokerage platforms — the day Schwab or Fidelity offers BUIDL alongside their existing money market options is the day this category goes from $14 billion to $100 billion+.

The contrarian risk: rates fall sharply, DeFi demand stalls, and the tokenized Treasury market plateaus at its current size. In that scenario, the category survives but does not transform anything. We assign roughly a 20% probability to that outcome.

Base case: continued growth to $14–$20 billion by end of 2026, $50–$100 billion by 2028, and eventual convergence with traditional money market infrastructure. Probability: 60%.

Bull case: regulatory clarity accelerates, TradFi platforms integrate tokenized products natively, and tokenized Treasuries become the default cash management tool for any entity operating on-chain. Market exceeds $200 billion by 2028. Probability: 20%. That is the scenario where BUIDL becomes a household name in finance.

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