The demand for tokenized treasuries is increasing, with more than $1 billion in treasury notes already tokenized on public blockchain networks. The recent launch of BlackRock’s BUIDL fund, which is currently the largest tokenized treasury fund in the world, is accelerating this trend. Larry Fink, CEO of BlackRock, has mentioned that moving capital markets on-chain could make them more efficient. Tokenized treasuries are digital tokens created on a blockchain, backed by a portfolio of U.S. government obligations and issued by both blockchain-native firms and traditional institutions. These assets are becoming more important as they help money market funds and their investors manage liquidity.
In times of market volatility, investors may need to meet margin calls on some positions, leading to an increase in liquidity risk. Tokenized treasuries can help address this challenge by allowing investors to access liquidity round-the-clock on-chain. For example, BlackRock’s BUIDL fund enables investors to redeem their shares for USDC stablecoin through a smart contract on the Ethereum blockchain. This reduces the risk of a run on a fund and allows investors to use their tokens as liquid collateral rather than redeeming them. Fractional ownership of real-world assets can also be enabled through tokenized treasuries, allowing for smaller investors to participate.
While the concept of tokenized treasuries offers many benefits, it is still an emerging asset class, and investor interest is unclear. Blockchain interoperability is needed to support active secondary markets, enabling investors to realize the benefits of holding a tokenized asset. Regulatory clarity around stablecoins will also help investors engage with features like 24/7 liquidity through smart contracts. Despite the potential of tokenized treasuries to benefit institutions, challenges remain, such as the need for direct access to the blockchains on which the assets are built and the connection of legacy systems to these blockchains. Institutions like BlackRock, Franklin Templeton, and WisdomTree are exploring how blockchain can streamline aspects of traditional finance.
For tokenized treasuries to be successful, investors must have direct access to the blockchains on which the assets are built, and institutions need to connect their legacy systems to these blockchains. Plume Network aims to simplify the process of real-world asset project deployment and provide investors with a blockchain ecosystem to invest in various assets. Regulatory frameworks in key jurisdictions will enhance investors’ appetite to engage with stablecoins and the features they enable, such as disintermediated redemption through smart contracts. As institutional investors increasingly adopt real-world assets, a new wave of retail investors may inject capital into blockchain ecosystems like never before, leading to sustainable growth and mainstream acceptance.
