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Tokenized Treasuries Worth More than $1 Billion, But Still Account for Just a Fraction of $5 Trillion Market

Last Updated May 15, 2024 1:29 PM
James Morales
Last Updated May 15, 2024 1:29 PM
By James Morales
Verified by Peter Henn

Key Takeaways

  • The market capitalization of tokenized money market funds has climbed above $1 billion.
  • BlackRock’s Ethereum-based BUIDL has helped boost adoption.
  • However, tokenized funds still account for less than 0.5% of the overall market.

Since its launch in March, Blackrock’s tokenized money market fund (MMF), BUIDL, has helped push the market capitalization of tokenized treasuries above $1 billion for the first time.

But that remains just a tiny fraction of the overall market, which at the latest count was worth nearly $5 trillion.

Less Than 1% of MMFs Are Tokenized

According to the Investment Company Institute (ICI), the total value  of money market fund assets stood at $6.03 trillion for the week ending Wednesday, May 8.

Excluding prime MMFs which hold commercial paper and tax-exempt funds which hold municipal debt, funds that hold only US Federal debt were worth $4.88 trillion. Non-US Treasury funds are negligible in comparison.

In other words, Tokenized MMFs represent just a tiny fraction of the overall market. In fact, their total market capitalization is equivalent to less than 1% of some of the largest Treasury funds in the world 

The Fidelity Government Money Market Fund (SPAXX ) currently holds $323 billion in T-Bills, repos and obligations. Equivalent funds managed by BlackRock (TFDXX ) and Vanguard (VMFXX ) have net assets of $149 billion and $296.9 billion.

Tokenized Treasuries: An Emerging Asset Class

Although tokenized MMFs remain insignificant compared to their traditional peers, many of which have been around for decades, the emerging treasuries asset class is expanding rapidly.

BlackRock’s entry into the space has helped their total market capitalization roughly double in the space of a year. Alongside Franklin Templeton’s FOBXX, BUIDL is now the second large MMF issued by a major asset manager. Meanwhile, the likes of Vanguard, Fidelity and others could soon follow.

chart showing growth of tokenized Money Market funds

Both firms have been piloting tokenization platforms for several years. It looks like they will, almost certainly, also launch new on-chain investment products as the field continues to grow.

However, several technical challenges must be resolved before tokenized funds break through into the mainstream.

What’s Holding Tokenized Funds Back?

In comments shared with CCN, S&P Global Digital Assets Managing Director Andrew O’Neill said “interoperability challenges” continue to inhibit the growth of tokenized real-world assets.

While tokenization can streamline share issuance and transfers, he pointed out that institutions still need to plug their legacy systems into blockchains to build new digital MMFs. 

Unlike some equivalent crypto-native investment products, regulated securities also require the support of large banks. And although they too have been cautiously embracing tokenization, mass adoption will take time.

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