Tokenized U.S. Treasury Market Surpasses $5 Billion Amid Rising Demand

According to BlockBeats, the market value of tokenized U.S. Treasury securities has exceeded $5 billion for the first time this week, marking a $1 billion increase in just two weeks. This surge is primarily driven by the tokenized Treasury fund BUIDL, launched by asset management giant BlackRock and digital asset company Securitize. Currently, the top five tokenized U.S. Treasury funds are: - BlackRock and Securitize's BUIDL: $1.702 billion - Hashnote's USYC: $765 million - Franklin Templeton's BENJI: $693 million - Ondo Finance's USDY: $594 million - Superstate's USTB: $413 million Tokenized U.S. Treasuries are at the forefront of the tokenization trend, attracting significant attention from global financial giants and digital asset companies. Fidelity Investments has recently joined the ranks of major U.S. asset management firms exploring tokenized money market funds. Last week, the company submitted an application to launch a tokenized version of a dollar money market fund on Ethereum. Cynthia Lo Bessette, head of Fidelity's digital asset management division, expressed optimism about tokenization and its transformative potential for the financial services industry, citing its ability to enhance trading efficiency through effective capital allocation across markets. Potential of Tokenized U.S. Treasuries Tokenized U.S. Treasuries allow investors to deploy idle funds on the blockchain to earn returns, functioning similarly to traditional money market funds. Additionally, tokenized Treasuries are increasingly used as reserve assets in DeFi protocols, with significant potential for use as collateral in trading and asset management activities. State Street Bank is also exploring the tokenization of bonds and money market funds. Donna Milrod, the bank's product chief, noted that collateral tokens could have mitigated the liability-driven crisis faced by UK pension funds in 2022, enabling pension funds and asset managers to meet margin requirements using money market fund tokens without liquidating assets to raise cash. Advantages and Disadvantages of Tokenized U.S. Treasuries Some may wonder why tokenized versions are necessary when traditional U.S. Treasuries are essentially the same. Here is a comparison: Disadvantages of Traditional U.S. Treasuries: - Cross-border transaction limitations: High costs and slow speeds in cross-border transactions. - Low settlement and delivery efficiency: Traditional financial transactions often require T+1 or longer settlement cycles. Advantages of Tokenized U.S. Treasuries (based on blockchain technology): - 24/7 instant settlement, significantly improving transaction efficiency. - Breaking geographical and financial institution barriers, promoting global capital flow. However, tokenized U.S. Treasuries also pose risks, such as implementing AML/KYC standards to prevent money laundering and fund misappropriation. Additionally, blockchain asset security, smart contract vulnerabilities, and potential hacking risks remain challenges the industry must overcome.