US Treasury Tokens Top $1 Billion as Traditional Finance Turns to Blockchain
Summary:
Over $1 billion of U.S. Treasurys have been tokenized on public blockchains, led by investment firms like Franklin Templeton and BlackRock. Tokenizing these securities revolutionizes their issuance, trading, and management, increasing liquidity and access for smaller investors. This shift follows a period of elevated interest rates and aims to merge traditional financial assets with blockchain technology.
Over $1 billion worth of U.S. Treasurys have been tokenized on public blockchains, demonstrating the continued movement of traditional finance towards on-chain securities during a period of high interest rates. According to data from 21.co and Dune Analytics, as of March 28, tokenized U.S. government bonds reached a total value of $1.07 billion, across 17 different products. Ethereum, Polygon, and Stellar are the main platforms for these assets.
The leading issuer is Franklin Templeton, a reputed investment company, which has tokenized over $360.1 million in assets, commanding 33.6% of the overall market through its Franklin OnChain U.S. Government Money Fund (FOBXX). The fund, represented by the BENJI token, was launched on the Polygon and Stellar blockchains in 2021. BlackRock holds the second spot with its USD Institutional Digital Liquidity Fund, or BUILD, having $244.8 million in tokenized assets, which comprises 22.8% of on-chain U.S. government bonds.
U.S. Treasurys are debt securities from the federal government. Investors purchase these securities, lending money to the government, which in turn guarantees to repay the principal sum on a certain date, along with interest. The growing interest rates in recent years have rendered government bonds more appealing to investors, considering the risk-return trade-off. The Federal Reserve has kept its benchmark rates at a 23-year peak between 5.25% and 5.50% as of March to moderate inflation.
U.S. Treasury tokens witnessed a 641% increase in value in 2023 due to the advent of blockchain technology. Tokenizing these securities translates into producing digital tokens that symbolize the ownership of the underlying security. This impacts how securities are issued, handled, and traded, providing increased liquidity and inviting smaller investors to take part in the market.
Established financial institutions, such as UBS and JPMorgan, have ventured into asset tokenization, with projects aiming to connect traditional financial assets with blockchain technology. Crypto projects have also embraced tokenized U.S. Treasurys to bolster their operations. For instance, Ondo Finance, a decentralized finance platform, is now the largest holder of BlackRock's BUILD, owning 38% of the fund supply, as per Tom Wan, a data analyst at 21.co.
Published At
3/28/2024 8:10:00 PM
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