Tokenized treasuries, funds and private credit

Tokenized government bond and money-market funds, most of them invested in US Treasury bills, are the part of the real-world asset market that has moved from pilots to daily use. They give on-chain holders a dollar yield, they serve as reserve and collateral assets, and they are the template that other tokenized funds copy. Private credit is the other large segment, with very different risks.

Why Treasuries came first

Short-term US government debt is the simplest asset to tokenize. It is liquid, priced every day, legally well understood and already held through money-market funds that redeem at or near $1.00. The demand came from the crypto side: stablecoin issuers, trading firms, DAOs (decentralized autonomous organizations) and exchanges held billions in stablecoins that pay no interest. A token that pays a Treasury yield and moves on the same chains solved an obvious problem.

Market size depends on how you count. Trackers such as rwa.xyz separate distributed assets, tokens that can be transferred between wallets on a public chain, from represented assets, which are recorded on a ledger but cannot move freely (for example loans recorded on a private platform). Represented assets are much larger in total, dominated by a few platforms that record loans on their own ledgers, while tokenized Treasury products are one of the largest categories of distributed assets.

Such figures move every week and differ between trackers because of methodology: which products are counted, whether represented assets are included, and how fund shares held by other funds are treated. When quoting a market size, always give the source, the date and the definition.

How a tokenized money-market fund works

The legal structure is a normal fund. What changes is the register and the way shares move.

1. Onboarding. The investor passes KYC (know-your-customer) and eligibility checks with the transfer agent or placement agent, and registers one or more wallet addresses, which are added to the token's allowlist.
2. Subscription. The investor sends dollars by wire or, for some funds, stablecoins.
3. Minting. The transfer agent records the new shares and mints tokens to the investor's wallet.
4. Investment. The fund manager invests in Treasury bills, other government securities, cash and repurchase agreements (repo), held by a conventional custodian bank.
5. Income and redemption. Income accrues daily. On redemption, tokens are burned and cash or stablecoins are paid out.

Two income models exist. A stable-value token targets $1.00 and pays income as additional tokens, so the balance grows. An accumulating token keeps the number of tokens fixed and lets the price per token rise. The difference matters for accounting, tax and smart-contract integration, because many DeFi protocols assume a token's balance does not change on its own.

Two reference products

BENJI was described at the time as the first US-registered mutual fund to use a public blockchain to process transactions and record share ownership. BUIDL became the first tokenized Treasury fund to pass $1 billion in assets, in March 2025. Many similar products now exist from other managers and specialized issuers, in several fund domiciles and currencies, some structured as notes rather than fund shares. The comparison shows the main design choice: a private fund limited to professional investors, or a publicly registered fund that can reach a wider base but carries heavier regulation.

Collateral and DeFi uses

The real innovation is not the yield, which is the same as in any money-market fund, but collateral mobility. A fund share that sits in a brokerage account cannot be posted as margin at 3 a.m. on a Sunday. A token can.

• Exchange and derivatives collateral. In 2025, crypto venues including Deribit and Crypto.com began accepting BUIDL as collateral, and on 14 November 2025 Binance announced it would accept BUIDL as off-exchange collateral, held with custody and banking partners rather than on the exchange itself.
• Instant exit liquidity. Since April 2024, a smart contract operated by Circle lets BUIDL holders transfer their shares to Circle in exchange for USDC, 24/7. This is a secondary-market sale to a third party, not a redemption by the fund, so it depends on Circle's willingness and capacity.
• Stablecoin and protocol reserves. Stablecoin issuers and DeFi protocols hold tokenized Treasury funds as part of their reserves or treasuries.

Three limits apply. The allowlist means the token can only go to approved addresses, so it cannot simply be deposited into an open lending pool; integrations use approved smart contracts or wrapper tokens issued by a third party, which adds a new layer of counterparty risk. Haircuts remain: a venue accepting a tokenized fund as margin values it below 100% to cover price moves and redemption delay. And the redemption cycle still follows the fund's dealing days and cut-off times unless a third-party liquidity facility steps in.

Private credit

Tokenized private credit covers loans to businesses or consumers that are originated off-chain and funded or recorded on-chain. Models include:

• On-chain lending pools, where lenders deposit stablecoins and an underwriter or pool delegate lends them to borrowers such as trading firms, fintech lenders or small businesses in emerging markets.
• Securitization-style vehicles, where a pool of receivables (invoices, trade finance, consumer loans) is placed in an SPV and tokenized notes are issued in senior and junior tranches.
• Loan origination platforms that record loans, such as home-equity lines of credit, on their own blockchain. These account for a large share of the "represented" figures on trackers but are mostly not freely transferable.

Tokenization does not change credit risk. The best-known warning came in December 2022, when Orthogonal Trading defaulted on about $36 million of loans from pools on the Maple platform after the collapse of FTX. Other on-chain credit platforms have also recorded defaults. Investors must analyze the borrower, the underwriting standards, the seniority of their tranche, the collateral and the recovery process exactly as in conventional private credit, plus the platform and smart-contract layer on top.

Reported yields on tokenized private credit are often higher than Treasury yields precisely because the risk is higher. A yield figure without default history, loss rates and concentration data is not enough for a decision.

Distribution and investor eligibility

A token does not escape securities law. Most tokenized funds are securities, and they are distributed under the rules of each country where investors are located. Everywhere, the same basic choice applies:

• Private placement: the fund is offered only to professional, qualified or accredited investors, as each jurisdiction defines them, usually with high minimums and limited disclosure. Most tokenized funds so far use this route.
• Public offering: the fund is registered or authorized for sale to the general public, which brings prospectus, depositary and investor-protection rules but a much wider market.

A fund offered in several countries must meet each one's definitions at once, so issuers often limit eligibility to the strictest common group and exclude investors from some countries entirely.

The eligibility check happens at wallet onboarding, not at each trade, so the controls that matter are: who verifies the investor, how often the check is refreshed, how a wallet is removed from the allowlist, and what happens to tokens sent to a wallet that is not eligible. Secondary trading on venues is usually limited to other eligible holders, which keeps secondary liquidity thin.

Exam focus: why short-term government debt was the first tokenized asset at scale; distributed versus represented assets and why market sizes differ by tracker (always quote source, date and definition); the onboarding, subscription, minting, investment and redemption flow; stable-value versus accumulating token models and why the first can break DeFi integrations; private versus publicly registered tokenized funds, with BUIDL and BENJI as examples; collateral mobility and its limits (allowlists, haircuts, redemption cycle, third-party liquidity facilities such as Circle's USDC exchange for BUIDL being a sale, not a redemption); private credit risk is unchanged by tokenization (Maple/Orthogonal default, December 2022); eligibility is checked at wallet onboarding.