What are Tokenized Treasuries? A guide

Often seen as the bedrock of global finance, U.S. Treasuries represent the safest and most liquid assets in the world. Issued by the U.S. Department of the Treasury, these government-backed securities are a cornerstone for investors seeking stability, reliable income, and a benchmark for risk-free returns. Whether in the form of short-term Treasury bills, medium-term notes, or long-term bonds, Treasuries play a critical role in everything from central bank policy to personal investment portfolios. Yet while their reputation is rooted in safety, the world of Treasuries is far from static—shaped by interest rate shifts, inflation expectations, and the evolving global demand for safe-haven assets.

The U.S. Treasury market, with over $28 trillion in outstanding debt. Yet despite its scale and significance, the infrastructure supporting Treasury trading remains surprisingly antiquated, creating three fundamental inefficiencies:

• Settlement Delays: Treasury trades typically settle on a T+1 or T+2 basis, leaving counterparty risk exposure during this gap and tying up capital that could be deployed elsewhere.
• Excessive Intermediation: The settlement chain involves multiple brokers, clearing banks, custodians, and depositories—each extracting fees and adding operational complexity.
• Fragmented Access: Information is only available in periodic reports, and retail participation remains limited.

Traditional Treasury trading involves a complex network where primary dealers interact with the Federal Reserve, electronic trading platforms connect with clearing services through the Fixed Income Clearing Corporation (FICC), and custody is managed through entities like the DTCC. This multi-layered system creates both operational risks and elevated costs.

The Securities Industry and Financial Markets Association (SIFMA) recognized these limitations in their December 2024 study of a blockchain-based Regulated Settlement Network. Their findings confirmed that distributed ledger technology could potentially eliminate reconciliation errors, reduce counterparty risk, and lower settlement times—capabilities that modern blo ckchain networks already deliver.

While these operational inefficiencies create a compelling case for modernization, the rise of tokenization is equally driven by demand from the growing $210 billion in onchain stablecoin wealth. This sophisticated crypto-native user base increasingly seeks stable, yield-bearing alternatives beyond volatile cryptocurrencies and non-interest-bearing stablecoins. By creating a tokenized version of the  treasuries (typically ERC-20 tokens), blockchain enables 24/7 global trading and direct integration with DeFi protocols—letting these assets function as both yield instruments and programmable collateral.

A prime example of tokenized Treasuries in practice is the Janus Henderson Anemoy Treasury Fund, launched on Centrifuge. Rated AA+ by S&P, Aa by Moody’s and A+ by Particula, it provides access to tokenized U.S. Treasuries with 24/7 redemptions of up to $125 million. 

The success of stablecoins as a tokenized representation of U.S. dollars underscores this potential. With stablecoins circulating approximately $208 billion and handling over $4 trillion in transactions in February, the transition to tokenized treasuries appears to be a natural evolution. For instance, while Circle’s USDC—a stablecoin with a $55 billion supply—holds a substantial portion of its reserves in treasuries, the yield from these assets currently benefits Circle rather than the token holders.

In contrast, tokenized treasury funds pass yields to users directly. Despite onchain treasury assets totaling $4 billion today, they represent only 1.5% of the overall stablecoin market cap—a share that is ready for significant expansion.

Circle has recognized this opportunity and adapted its strategy. In an important milestone for the RWA industry, Circle announced its acquisition of Hashnote, the issuer of USYC, in January 2025.

“The integration of USYC and Hashnote into Circle’s platform marks a major moment in the evolution of the stablecoin market, as cash and yield-bearing short-duration treasury bill assets become fungible and convertible at the speed of blockchains and crypto capital markets. This is a huge unlock for a market that is increasingly being driven by institutional adoption, and where participants increasingly expect market structures that are common in TradFi.”
Jeremy Allaire, CEO of Circle

Securitize, a SEC-registered broker-dealer and transfer agent specializing in digital securities, has emerged as an infrastructure provider for regulated tokenized assets. As the transfer agent for BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), Securitize provides the regulatory compliance layer that has helped BlackRock bring its first tokenized product to market:

“Securitize supported BlackRock’s launch of its first tokenized fund, BUIDL, which became the largest tokenized U.S. Treasury fund in just 40 days and is currently at approximately $630 million in AUM.”
Carlos Domingo, CEO of Securitize

This institutional adoption is significant because it demonstrates how traditional finance giants are validating the tokenization thesis. Unlike previous experimental DeFi protocols, Securitize enabled regulatory-compliant tokenization through their SEC and FINRA-registered status, providing a bridge between traditional asset managers and blockchain technology.

In response to the inefficiencies of traditional systems and the lack of yield from stablecoins, a new generation of tokenized treasury products has emerged. These products operate within a few different frameworks, from fully permissioned to semi-permissionless, wherein only pre-approved institutions are authorized to mint and redeem treasury tokens. Custodians hold the underlying treasury products and investors get a token that represents a share of the fund itself. 

In practice, there are two primary functions:

1. Minting and Redemption (Centralized): Investor receives tokenized fund share that can be redeemed in kind. 
2. Onchain Utility (Permissionless): Once issued, these tokens can be used to integrate into broader DeFi ecosystems, collateralizing stablecoins or enabling trading, lending, or borrowing on platforms such as Aave, Morpho, and Pendle.

This hybrid approach has spurred competitive innovation across products, each competing on factors such as structure, liquidity, fees, and user accessibility. The table below summarizes key offerings currently available in the market:

Table Source: RWA.XYZ

One persistent criticism of tokenized assets has been limited secondary market liquidity—a challenge now being addressed through institutional-grade liquidity provision networks. The Anemoy Liquidity Network (ALN), launched by Anemoy and Centrifuge in November 2024, represents a critical infrastructure development that directly addresses these concerns. Anemoy leverages partnerships with specialized market makers such as Keyrock to guarantee $125 million in instant redemptions and an additional $100 million in same-day liquidity for its Janus Henderson Anemoy Treasury Fund.

This development is particularly significant because it implements ETF-style market-making infrastructure for tokenized assets—solving a core problem that previously limited institutional participation.

“We built the Anemoy Liquidity Network with one simple objective: ensure liquidity is accessible when investors need it most. Having been part of the ETF market-making ecosystem for over 15 years, I’m convinced that for RWAs to reach their full potential, we must apply the lessons from ETF capital markets. That’s exactly what we’re doing at Anemoy and Centrifuge.”
Anil Sood, Centrifuge,Chief Strategy and Growth Officer

The technical design of tokenized Treasury products presents unique challenges that directly impact their adoption and utility. Two competing pricing models have emerged, each with distinct trade-offs:

1. Accruing Model (Price Appreciation):

In this design, a token’s price gradually increases to reflect accrued yield, starting at $1.00 and drifting upward over time (e.g., $1.02 after accumulating 2% yield). While this accurately represents the underlying asset’s economics, it creates liquidity provision challenges.

• Automated Market Makers (AMMs) like Uniswap v3 rely on static price ranges, forcing liquidity providers (LPs) to constantly adjust positions or rely on arbitrage to capture yield.
• This often results in impermanent loss, as LPs may experience negative returns when tokens trade below their intrinsic value, reducing liquidity depth and discouraging market-making.

2. Rebasing Model (Quantity Adjustment):

This model keeps the token price fixed at $1.00 but adjusts token balances in holders’ wallets periodically to distribute yield. While this prevents price drift, it introduces predictable rebasing events that sophisticated traders can exploit.

• Bots can front-run rebases by purchasing tokens immediately before a balance adjustment and selling right after, extracting value from long-term holders.
• This practice—often referred to as Rebasing Backrun Arbitrage (RBA)—can distort market incentives and reduce capital efficiency.

These pricing complexities contribute to thin onchain liquidity, leading many tokenized treasuries to depend on oracles that assume a fixed 1:1 peg with the underlying collateral, rather than using dynamic pricing feeds from centralized or decentralized exchanges. This assumption limits their adoption as collateral in blue-chip DeFi applications like Sky (formerly MakerDAO) and Aave, which rely on robust, real-time price discovery to manage risk.

Solving this oracle and pricing challenge could unlock billions in additional demand, allowing tokenized treasuries to serve as high-quality collateral across DeFi lending markets.

Similarly, the reliability of price data is crucial for institutional adoption of tokenized assets. Chainlink, the dominant oracle provider that secured over $18.2 trillion in transaction value across DeFi, has been instrumental in addressing these data challenges. By providing verified price feeds that connect onchain protocols with off-chain financial data, Chainlink solves a critical infrastructure problem that previously limited the use of tokenized treasuries as collateral. Their perspective on the technical requirements highlights why reliable pricing is fundamental to tokenization’s success:

“Tokenized assets require more than digitization—they must incorporate robust real-time data feeds, secure cross-chain infrastructure, and fully transparent reserve verification to ensure compliance and investor trust. Chainlink’s infrastructure directly addresses these foundational challenges, significantly reducing operational friction and accelerating institutional adoption.”
Colin Cunningham Head of Tokenization & Alliances, Chainlink

Moreover, Treasury-backed tokens exhibit yield behaviors that are particularly sensitive to macroeconomic shifts:

• Low Treasury Yields typically increase onchain borrowing costs, as risk-free alternatives become less attractive, driving demand for leverage. This enhances the value of high-quality collateral like USDC, which remains in strong demand as a borrowing asset.
• High Treasury Yields can reduce demand for stablecoin collateral, as investors shift toward earning yield directly from tokenized treasuries or traditional sources instead of using stablecoins in DeFi lending markets. As a result, borrowing costs on platforms like Aave tend to decrease, since more capital is allocated to higher-yielding, lower-risk opportunities.

This dynamic creates a natural countercyclical hedge within DeFi ecosystems—as traditional rates rise, tokenized treasuries can absorb capital from pure stablecoins; when traditional rates fall, capital flows back to DeFi lending. This complementary relationship strengthens the overall resilience of onchain financial markets by creating multiple, interconnected yield paths rather than leaving the system dependent on a single yield source. For traders and liquidity providers, understanding these flows offers significant yield opportunities through strategic capital reallocation.

Yield comparisons—benchmarked against Aave’s USDC rate—indicate that these products, though closely linked to treasury yields, provide relatively risk-free and competitive methods for users to earn yield on their stablecoins.

The current $4 billion in tokenized Treasury products represents just 1.5% of the stablecoin market—a penetration rate that reveals enormous growth potential. When compared to traditional finance, where money market funds holdings total over $7 trillion, the addressable market becomes even more compelling. With Treasury yields currently at approximately 4%, stablecoin holders collectively sacrifice roughly $8 billion in annual interest by holding non-yield-bearing assets—creating a massive, immediate incentive for adoption.

Circle’s acquisition of Hashnote in January 2025 represents the potential of the sector. By bringing USYC’s Treasury yield capabilities under the same roof as the $55 billion USDC stablecoin, Circle has positioned itself to potentially offer seamless yield options to millions of existing stablecoin users. This strategic consolidation signals confidence from major financial infrastructure players and creates a pathway for rapid scaling through established distribution channels. As Jeremy Allaire explained:

“We helped invent tokenized cash, and are now leading the way in tokenized money markets, both of which we believe will become essential to the future of the global financial system.”
Jeremy Allaire, Chief Executive Office, Circle

Looking forward to 2025 and beyond, increased adoption appears inevitable as investors seek secure, yield-enhancing alternatives. The proven market viability of stablecoins suggests that incorporating Treasury-backed yield will resonate with evolving investor needs. While the adoption curve may be moderated by concerns over stability and regulatory clarity, broader participation by major asset managers is expected to bolster market confidence.

In parallel, traditional finance is likely to witness the emergence of structured products that blend stablecoins with tokenized Treasuries—unlocking new investment strategies for both retail and institutional players. Enhanced interoperability within DeFi will further enable these tokens to serve as robust collateral, key components in liquidity pools, and foundational elements in sophisticated yield optimization strategies.

“The demand for tokenized Treasuries is no longer theoretical – it’s happening now. With institutions coming onchain, infrastructure maturing, and strong catalysts like the Sky $1B Tokenization Grand Prix, the foundation for widespread adoption is firmly in place. We’ve moved beyond proof-of-concept to building viable, long-term products that not only capture the opportunities of onchain capital markets today but also unlock the full transformative potential of blockchain for the future.” .

Bhaji Illuminati, CEO, Centrifuge

Following the widespread adoption of stablecoins and growing demand for native yield opportunities, U.S. Treasuries emerged as the natural first candidate for large-scale tokenization due to their uniform structure, established risk profile, and relative simplicity compared to more complex financial instruments. This successful implementation establishes critical infrastructure and market confidence that will serve as the foundation for tokenizing more complex asset classes, creating a blueprint for the broader transformation of traditional finance.

We expect tokenized Treasuries to evolve from a niche innovation into a core infrastructure component of global digital finance. Their impact will extend far beyond their direct market size by enhancing collateral efficiency, instant settlements, creating 24/7 access to government debt, and allowing for more integrated onchain yield strategies.