Tokenized Treasury notes have experienced rapid growth, doubling in market capitalization to surpass $2 billion just five months after reaching the $1 billion mark. These digital representations of U.S. government bonds are traded as tokens on various blockchains like Ethereum, Stellar, and Solana.
Despite this significant milestone, the tokenized Treasuries market is still relatively small compared to the overall U.S. Treasury market, which is valued at $27 trillion.
A major contributor to this growth is BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), which became the largest tokenized Treasury fund within six weeks of its launch in late March.
BUIDL now holds $503 million in assets, up from its initial $375 million market cap. Other major players in the market, such as Franklin Templeton’s OnChain U.S. Government Money Fund and Ondo’s U.S. Dollar Yield, have also seen substantial growth in their tokenized Treasury products.
However, much of the recent expansion in the market has been driven by smaller issuers. Hashnote, for instance, saw its assets grow by nearly 50% in the past month, reaching $218 million. Other companies like OpenEden and Superstate have also experienced significant growth, with their market caps approaching $100 million each.
Tokenized Treasury funds have gained popularity among crypto traders as a means of diversifying their portfolios and capitalizing on the recent surge in U.S. Treasury yields. These funds allow investors to engage in Treasury markets with the added benefits of blockchain technology, such as the ability to settle transactions at any time.
The rise in U.S. Treasury yields has been a driving factor behind the growth of tokenized Treasuries. The 10-year U.S. yield has climbed to 3.81%, compared to 1.5% four years ago, while the 2-year yield has increased to 3.92% from near zero levels in 2020 and 2021. This has made Treasury investments more attractive, further fueling the demand for tokenized versions of these assets.
