Tokenized Fund Shares: How BlackRock's BUIDL and Competitors Cut Settlement from T+1 to T+0

When the United States compressed its securities settlement cycle from T+2 to T+1 in May 2024, it was the biggest structural change to equity markets in decades. Yet for a growing cohort of institutional investors, even T+1 feels slow. Tokenized fund shares settle in seconds, trade around the clock, and eliminate the multi-day chain of intermediaries that has defined post-trade processing since the paper certificate era. By mid-2026, tokenized U.S. Treasury and money market products collectively manage over $26 billion in on-chain assets, tripling in twelve months according to RWA.xyz.

BlackRock’s BUIDL fund leads the field with roughly $2.9 billion in assets under management across nine blockchains. But it is not alone: Hashnote’s USYC, Franklin Templeton’s BENJI, and Ondo’s OUSG each bring distinct structural approaches to the same problem. This article profiles the leading products, dissects how atomic settlement actually works on-chain, and evaluates the risks that institutional allocators should weigh before treating tokenized fund shares as cash equivalents.

Why Settlement Speed Matters

In traditional finance, a trade is not truly complete until settlement: the moment when ownership of securities transfers from seller to buyer and cash moves in the opposite direction. Between execution and settlement lies a gap filled by clearing houses, custodian banks, transfer agents, and reconciliation processes. Each intermediary adds latency, cost, and settlement risk.

The SEC mandated T+1 settlement effective May 28, 2024, cutting the window from two business days to one for equities, corporate bonds, and municipal securities. The change reduced margin requirements at the National Securities Clearing Corporation by an estimated 41% and lowered counterparty exposure across the system. But T+1 still means trades executed on Friday afternoon do not settle until Monday, and cross-border participants in different time zones face compressed operational windows.

Blockchain-based settlement removes the gap entirely. On-chain, clearing and settlement can happen simultaneously in a single atomic transaction: delivery of the fund share token and payment in a stablecoin occur in the same block, or neither occurs at all. There is no counterparty risk window, no need for a central counterparty, and no distinction between business days and weekends.

Atomic settlement defined: Both legs of a transaction (delivery and payment) execute simultaneously in a single on-chain operation. If either leg fails, the entire transaction reverts. This eliminates the multi-day gap where one party has delivered but the other has not yet paid.

The Leading Tokenized Fund Products

Four products dominate the institutional tokenized Treasury landscape, each with different fund structures, chain strategies, and redemption mechanics.

BlackRock BUIDL

The BlackRock USD Institutional Digital Liquidity Fund (BUIDL) launched in March 2024 through Securitize as BlackRock’s first tokenized fund on a public blockchain. The fund invests in U.S. Treasury bills, repurchase agreements, and cash, maintaining a stable $1.00 per-share NAV with daily dividend accrual. As of July 2026, BUIDL holds approximately $2.9 billion in AUM across Ethereum, Avalanche, Solana, Aptos, Arbitrum, Optimism, Polygon, and BNB Chain, with cross-chain interoperability enabled by Wormhole.

BUIDL’s multi-chain deployment is its defining feature. Qualified investors can hold and transfer shares 24/7/365 on whichever chain suits their operational infrastructure. Securitize handles KYC/AML onboarding and maintains a whitelist of approved addresses, meaning the token is freely transferable only between verified participants.

Hashnote USYC

USYC is the on-chain token representing shares of the Hashnote International Short Duration Yield Fund, which invests in U.S. Treasury bills and reverse repurchase agreements. Circle acquired Hashnote in January 2025, and the fund now sits at approximately $3 billion in AUM: the largest single tokenized U.S. Treasury product by on-chain value as of mid-2026.

USYC’s standout capability is same-day atomic redemption into USDC. The fund supports T+0 subscription and redemption around the clock, subject to available instant-redemption capacity. Private Liquidity Tellers (PLTs) allow institutional clients to configure up to 100% instant liquidity into USDC at all times, making USYC function as a yield-generating cash equivalent with stablecoin-speed exits.

Franklin Templeton BENJI (FOBXX)

The Franklin OnChain U.S. Government Money Fund (FOBXX) was the first U.S.-registered mutual fund to use a public blockchain for transaction processing and share ownership recording. It launched on the Stellar network in 2021, well before tokenization became an institutional focus. The BENJI token represents fund shares and is now available on nine chains: Stellar, Polygon, Arbitrum, Avalanche, Aptos, Ethereum, Base, Solana, and BNB Smart Chain.

As of April 2026, the BENJI suite manages approximately $1.98 billion in AUM with investor counts growing over 140% between April 2024 and March 2026. What sets BENJI apart structurally: it is the only major tokenized Treasury product wrapping a U.S.-registered ’40 Act mutual fund rather than a private fund or offshore vehicle. This subjects it to SEC reporting, independent board oversight, and daily NAV strikes that private fund tokens are not required to provide.

Ondo OUSG

OUSG is Ondo Finance’s tokenized short-term U.S. government bond fund, targeting accredited investors with a $100,000 minimum. Since migrating its underlying holdings in 2024, the fund allocates across multiple institutional vehicles: State Street’s Galaxy Onchain Liquidity Sweep Fund, BlackRock’s BUIDL, Franklin Templeton’s BENJI, and Fidelity’s FYOXX. This multi-manager approach provides diversification at the reserve level. OUSG held approximately $407 million in assets as of mid-2026, part of Ondo’s broader $3.4 billion tokenized asset platform.

Comparing Tokenized Fund Products

How T+0 Settlement Works On-Chain

The mechanics of tokenized fund settlement differ fundamentally from traditional post-trade processing. Understanding the flow clarifies why the efficiency gains are structural, not merely incremental.

Traditional settlement flow

In conventional markets, an investor places an order through a broker, who routes it to an exchange or alternative trading system. After execution, the trade enters clearing at a central counterparty (in the U.S., the National Securities Clearing Corporation). The CCP nets obligations across participants, then instructs the Depository Trust Company to move securities and the Federal Reserve or correspondent banks to move cash. This process requires reconciliation across multiple ledgers, each maintained by a separate institution.

On-chain settlement flow

With tokenized fund shares, the investor interacts directly with a smart contract or transfer agent interface. The subscription flow works as follows: the investor sends stablecoins (typically USDC) to the fund’s smart contract, which verifies the sender address against the KYC whitelist, confirms the payment amount, and mints new fund share tokens to the investor’s wallet in the same transaction. Redemptions reverse the process: the investor sends share tokens to the contract, which burns them and releases stablecoins.

Because both legs (share delivery and payment) settle in a single blockchain transaction, the concept of a “settlement window” disappears. There is no counterparty exposure between execution and settlement, no overnight batch processing, and no reconciliation required across separate ledgers.

Settlement comparison

Advantages Beyond Settlement Speed

While T+0 settlement is the headline capability, tokenized fund shares unlock several additional structural advantages that traditional fund structures cannot replicate.

24/7 redemption and liquidity

Traditional money market funds process redemptions during business hours on business days. Tokenized equivalents operate continuously. USYC’s atomic redemption into USDC works at 2 AM on a Sunday. For treasury managers who need to deploy or recall capital outside banking hours, this eliminates the “weekend float” problem where idle cash earns no yield because redemption windows are closed.

Fractional ownership

Fractional ownership of tokenized fund shares allows smaller allocations than traditional minimums. While BUIDL’s initial minimum is $5 million, secondary market transfers can occur in smaller increments. BENJI’s registered mutual fund structure already permits retail-sized investments with no minimum, a capability that most private tokenized funds cannot offer due to accredited investor requirements.

DeFi composability

Tokenized fund shares can serve as composable building blocks within decentralized finance protocols. BUIDL tokens are already used as collateral in lending protocols and as backing for other tokenized products. The tokenized money market fund landscape increasingly sees these shares functioning as programmable yield-bearing collateral: a treasury bill that a smart contract can automatically pledge, transfer, or redeem based on coded conditions.

Transparent reserve backing

On-chain issuance creates auditable transparency for reserve assets. The total supply of share tokens, holder addresses (on public chains), and transfer history are verifiable by anyone with a block explorer. Combined with regular NAV attestations and portfolio disclosures, tokenized funds provide a transparency stack that traditional fund administration cannot match in real time.

The Regulatory Framework

Tokenized fund shares exist within established securities law rather than in a regulatory vacuum. Two key regulatory developments shape the current landscape.

SEC guidance on tokenized securities

On January 28, 2026, the SEC’s Divisions of Corporation Finance, Investment Management, and Trading and Markets issued a joint statement on tokenized securities. The core principle: registration requirements and investor protections follow the economic substance of the instrument, not the technology used to record it. Whether a fund share is recorded on a blockchain or a traditional ledger, the same disclosure obligations, reporting requirements, and enforcement regimes apply.

The SEC distinguished two categories: issuer-authorized tokenizations (where the fund itself issues on-chain shares) and third-party synthetic structures (where an intermediary wraps or mirrors existing securities without issuer involvement). The statement signaled tighter scrutiny for synthetic structures that expose retail investors to additional counterparty risk from the wrapper provider.

The GENIUS Act and stablecoin reserves

The GENIUS Act, enacted in July 2025, created the first comprehensive U.S. framework for permitted payment stablecoins. Critically, the law allows stablecoin issuers to hold tokenized money market fund shares as qualifying reserve assets. This created a direct demand channel: every dollar that a stablecoin issuer parks in BUIDL or USYC instead of a traditional bank deposit or T-bill account represents structural demand for tokenized fund shares.

Regulatory clarity matters: The SEC’s “substance over form” approach means tokenized fund shares issued by registered entities carry the same investor protections as their traditional counterparts. This is not a regulatory gray area: it is securities law applied to a new distribution technology.

Risks and Limitations

Tokenized fund shares are not risk-free substitutes for traditional money market instruments. Institutional allocators should evaluate several categories of risk that do not exist in conventional fund structures.

Smart contract risk

The mint, burn, and transfer logic governing tokenized shares runs on smart contracts. A bug in the contract code could freeze redemptions, allow unauthorized minting, or misroute funds. While major issuers like Securitize and Circle employ multiple audit firms and formal verification, no smart contract audit provides an absolute guarantee. The IMF warned in April 2026 that smart contracts governing margin calls or liquidations could accelerate selloffs during market stress, adding procyclical risk that traditional fund structures do not carry.

Custodial chain complexity

A tokenized fund share may involve the fund manager, the tokenization platform, the blockchain network, the custodian holding the underlying Treasuries, the transfer agent maintaining the whitelist, and the smart contracts recording balances. If any link in this chain fails, investors may face redemption delays or pricing gaps. The SEC’s joint statement explicitly noted that holders of third-party-wrapped tokenized securities face additional risks related to the wrapper’s operational and financial stability.

Liquidity constraints on instant redemption

“Instant redemption” depends on available stablecoin liquidity in the fund’s redemption pool. In a scenario where many holders redeem simultaneously, the pool can drain faster than it is replenished from underlying Treasury maturities. USYC addresses this with configurable PLTs, but the liquidity is finite. During market stress, the gap between “T+0 capable” and “T+0 guaranteed” becomes operationally significant.

Regulatory uncertainty for secondary trading

While primary issuance and redemption are well-defined under existing securities law, secondary trading of tokenized fund shares on decentralized exchanges or peer-to-peer markets raises unresolved questions about broker-dealer registration, best execution obligations, and market surveillance. The SEC has not yet issued definitive guidance on how secondary markets for tokenized fund shares should be regulated.

Concentration risk

The tokenized Treasury market is dominated by a small number of issuers. BUIDL and USYC together account for roughly $6 billion of the estimated $26 billion tokenized Treasury market. If the DeFi ecosystem builds collateral assumptions around a single product and that product experiences an operational disruption, the cascading effects through composable protocols could amplify losses in ways that isolated fund structures would not.

Growth Trajectory and Market Context

The tokenized real-world asset market (excluding stablecoins) reached approximately $33.5 billion by mid-2026, tripling in twelve months. U.S. Treasury and money market products account for roughly 80% of that total, making tokenized Treasuries the dominant on-chain RWA category by a wide margin.

Several structural catalysts are accelerating growth. The GENIUS Act created institutional demand by permitting tokenized fund shares as stablecoin reserves. BlackRock’s continued multi-chain expansion brings tokenized Treasuries to every major smart contract platform. Circle’s acquisition of Hashnote integrates the largest tokenized Treasury product directly into the USDC ecosystem. And traditional asset managers, from Franklin Templeton to Fidelity to WisdomTree, are launching or expanding their own on-chain fund offerings.

The trajectory suggests tokenized fund shares are moving from institutional experiment to core infrastructure. As on-chain yield products mature, the line between “holding a money market fund” and “holding a stablecoin” continues to blur.

Integration with Payment Rails

The real promise of tokenized fund shares extends beyond portfolio management. When a yield-bearing token can be atomically redeemed into a stablecoin, and that stablecoin can be sent instantly to a merchant or counterparty, the distinction between “savings” and “spending” collapses. Treasury managers could hold tokenized T-bill shares until the moment of payment, redeem to stablecoin, and settle a vendor invoice in a single workflow: no idle cash, no float, no weekend gaps.

This pattern becomes even more powerful on Bitcoin Layer 2 infrastructure. Spark, for example, supports native tokenized money and stablecoin transfers with instant settlement. A future integration path could see tokenized Treasury shares redeemed into stablecoins like USDB on Spark, enabling yield-bearing holdings to flow directly into payment rails without requiring Ethereum gas fees or centralized exchange intermediation. For developers building on these rails, the Spark SDK provides the toolkit for integrating stablecoin settlement into applications.

The broader implication is that tokenized fund shares are not just a better version of existing fund administration. They are a new category of programmable financial primitive, one that sits at the intersection of tokenized treasuries, stablecoin payment rails, and programmable money. As settlement infrastructure improves across chains, the composability between yield-bearing reserves and instant payment execution will define the next generation of treasury management.

To explore how traditional and on-chain settlement compare in practice, see the Crypto vs. Traditional Clearing and Settlement comparison tool.

This article is for educational purposes only. It does not constitute financial or investment advice. Bitcoin and Layer 2 protocols involve technical and financial risk. Always do your own research and understand the tradeoffs before using any protocol.