Tokenized Money Market Funds: BlackRock BUIDL and the On-Chain Treasury Boom

Tokenized money market funds have gone from a niche experiment to a multi-billion-dollar asset class in under two years. BlackRock's BUIDL fund, launched in March 2024, crossed $2.8 billion in assets under management by mid-2026. Franklin Templeton's BENJI surpassed $2.5 billion. Hashnote's USYC, now operated by Circle, reached $3 billion. Collectively, tokenized U.S. Treasury products tracked by RWA.xyz exceeded $15 billion by mid-2026, making on-chain treasuries the dominant category in the broader real-world asset tokenization market.

The appeal is straightforward: take the safest, most liquid instrument in traditional finance and make it composable, 24/7 settleable, and programmable. What was once locked behind brokerage accounts and T+1 settlement now lives on-chain, accessible to smart contracts, DAO treasuries, and stablecoin protocols alike.

What Is a Tokenized Money Market Fund

A tokenized money market fund is a traditional money market fund that represents its shares as blockchain tokens. The underlying portfolio holds short-duration U.S. Treasury bills, overnight reverse repurchase agreements, and government agency securities: the same instruments held by conventional money market funds managing trillions of dollars.

The fund manager (BlackRock, Franklin Templeton, or another licensed asset manager) handles portfolio construction, compliance, and custody through regulated channels. A tokenization platform like Securitize or the fund's own infrastructure then issues blockchain tokens representing fund shares. Each token is backed 1:1 by the fund's net asset value.

The core processes remain structurally unchanged from traditional finance: NAV calculation, subscription, redemption, asset custody, and yield distribution all follow established regulatory frameworks. Tokenization introduces a programmable access layer on top of these processes, not a replacement for them.

How Tokenized Fund Shares Work

Subscription and Redemption

Investors subscribe by sending stablecoins (typically USDC) to the fund's smart contract and receive fund tokens in return. Redemption works in reverse: investors burn fund tokens and receive stablecoins based on the current NAV. Traditional money market fund redemptions settle on T+1, requiring a redemption instruction to the transfer agent, end-of-day NAV calculation, and next-business-day cash settlement. On-chain redemption can settle within minutes, operating 24/7 including weekends and holidays.

NAV Calculation

Despite living on-chain, NAV calculation remains an off-chain process. The fund administrator values the underlying portfolio using standard mark-to-market rules, then publishes the NAV to the blockchain via a price feed or oracle. Subscriptions and redemptions execute at this published price. Investors can independently verify holdings through on-chain attestations and proof-of-reserves mechanisms, adding a transparency layer absent from traditional funds.

Yield Distribution Models

Three mechanisms dominate how tokenized treasury funds pass yield to holders:

• Rebasing: the token maintains a stable $1.00 price and new tokens are minted into holders' wallets daily, increasing the balance while keeping the unit price constant
• NAV accrual: the token supply stays fixed while the price appreciates over time, reflecting accumulated yield in a rising redemption value
• Dividend distribution: the token holds a stable price while yield is distributed as separate payments (typically in USDC) to holder wallets

Why the yield model matters: Rebasing tokens that maintain a $1.00 price are better suited for use as collateral in DeFi protocols and DAO treasuries, where a stable unit of account simplifies accounting. NAV accrual tokens are simpler for tax reporting in some jurisdictions, since they generate a single taxable event at redemption rather than daily income recognition.

The Major Players

BlackRock BUIDL

The BlackRock USD Institutional Digital Liquidity Fund (BUIDL) launched on Ethereum in March 2024 as a tokenized money market fund issued through Securitize. It invests in U.S. Treasury bills, repurchase agreements, and cash, maintaining a target NAV of $1.00 per token. Yield accrues daily and is distributed as additional BUIDL tokens to holders on a monthly basis.

BUIDL expanded to seven blockchains by early 2025, adding Solana, Avalanche, Aptos, Arbitrum, Optimism, and Polygon using Wormhole as the cross-chain interoperability provider. As of July 2026, BUIDL held $2.87 billion in total AUM across all chains, with $902 million on Avalanche alone. The fund's 7-day APY hovered around 3.40%.

In May 2026, BlackRock filed with the SEC to launch two new tokenized funds and to offer on-chain share classes for its existing $7 billion money-market fund, signaling that BUIDL was a proof of concept for a much larger tokenization strategy.

Franklin Templeton BENJI

Franklin Templeton's Franklin OnChain U.S. Government Money Fund (FOBXX) holds the distinction of being the first U.S.-registered mutual fund to use a public blockchain for transaction processing and share recording. Its on-chain share token, BENJI, launched on Stellar in 2021 and has since expanded to eight blockchains: Stellar, Polygon, Arbitrum, Aptos, Avalanche, Base, Solana, and Ethereum.

FOBXX grew from $594 million in January 2026 to over $2.5 billion by July 2026, representing more than 100% year-to-date growth. As an SEC-registered fund, BENJI operates under the Investment Company Act of 1940, giving it a regulatory framework that newer tokenized products are still navigating.

Hashnote USYC

USYC is a tokenized money market fund originally built by Hashnote, a regulated asset manager. Circle acquired Hashnote in January 2025, integrating USYC into its ecosystem alongside USDC. The fund holds short-term U.S. Treasuries and overnight reverse repos, with USYC using an appreciation model: the token price rises over time rather than rebasing.

As of mid-2026, USYC held approximately $3 billion in AUM, making it one of the largest tokenized treasury products by assets. The fund is live on Ethereum, Sui, and Canton, and is tightly paired with USDC for institutional cash-to-yield flows. Notably, Binance held approximately $1.43 billion in USYC at one point in early 2026, representing 94% of the total supply: a concentration risk worth watching.

Ondo Finance

Ondo Finance operates two primary tokenized treasury products. OUSG is a tokenized short-term U.S. government bond fund aimed at institutional accredited investors with a $100,000 minimum. Its portfolio primarily holds BlackRock's BUIDL fund, along with allocations to Franklin Templeton, WisdomTree, Fidelity, and Wellington vehicles. OUSG held roughly $625 million in AUM as of Q1 2026.

Ondo's second product, USDY, targets a broader audience. Available to non-U.S. investors without accredited status, USDY functions as a yield-bearing stablecoin backed by short-term Treasuries and bank deposits. USDY reached $2.1 billion in AUM by Q1 2026, with a yield around 4.65% APY. It is available on Ethereum, Solana, Aptos, Arbitrum, Mantle, Sui, and BNB Chain.

Superstate USTB

Superstate, founded by Compound creator Robert Leshner, launched USTB as a tokenized short-duration Treasury fund on Ethereum. USTB held over $967 million in AUM by mid-2026, ranking among the top five largest tokenized U.S. Treasury products. In March 2026, Superstate selected Invesco to externally manage the fund, bringing a $1.7 trillion traditional asset manager into the tokenization ecosystem.

Comparing Tokenized Treasury Products

Tokenized Treasuries vs Stablecoins

Tokenized money market funds and fiat-backed stablecoins both hold U.S. Treasury bills as a primary reserve asset. Circle's USDC reserves and Tether's USDT reserves are heavily weighted toward short-term Treasuries. The structural difference lies in who captures the yield and under what regulatory framework.

Stablecoins are designed as payment instruments: the issuer holds the reserves, earns the yield, and the holder receives a stable-value token pegged to $1.00. Under the GENIUS Act, signed in July 2025, payment stablecoin issuers are explicitly prohibited from paying yield on issued stablecoins. This prohibition covers cash payments, token distributions, and similar benefits passed directly to holders.

Tokenized treasury funds occupy a different legal category. As registered securities or exempt offerings, they can and do pass yield to holders. This regulatory distinction has created what some legal scholars describe as arbitrage by legal form: economically similar products with different yield-sharing characteristics based purely on their regulatory classification.

The yield gap in practice: A stablecoin holder parking $1 million in USDC earns 0% yield directly from the token (though platforms like Coinbase may offer loyalty rewards). The same $1 million in BUIDL or USYC earns 3-5% APY passed through to the holder. Both products hold nearly identical underlying assets. The difference is the legal wrapper.

The GENIUS Act and the Yield Divide

The GENIUS Act's yield prohibition has accelerated institutional interest in tokenized treasury funds as an alternative to idle stablecoin balances. If you cannot earn yield on your stablecoins, the logical next step is to park idle capital in a tokenized fund that passes through Treasury yields, then redeem back to stablecoins when you need liquidity.

The prohibition is not airtight. The drafters wrote it narrowly, banning yield paid by the issuer but leaving affiliate-paid yield unaddressed. Coinbase, for example, pays USDC holders a 3.5% APY loyalty reward, booking it under a revenue-sharing arrangement with Circle rather than direct issuer yield. In February 2026, the OCC issued a proposed rulemaking that would create a rebuttable presumption that coordinated arrangements between issuers and affiliates to pay yield constitute a prohibited arrangement. The comment period closed in May 2026, with industry pushback ongoing.

Regardless of how the affiliate loophole resolves, tokenized MMFs have established themselves as the compliant path for on-chain yield. Products structured as securities face different disclosure requirements but face no prohibition on passing returns to investors: that is precisely what securities are designed to do.

Why On-Chain Treasuries Are Growing

Institutional Cash Management

Corporate treasurers and DAO treasuries hold large stablecoin balances that sit idle between deployments. Tokenized treasury funds allow these balances to earn risk-free yield without leaving the blockchain. No bank wire, no brokerage account, no T+1 settlement delay. A DAO can vote to allocate 40% of its treasury to BUIDL, execute the subscription via smart contract, and begin earning yield within the same block.

DeFi Collateral

Stable-NAV tokenized treasury tokens can serve as collateral in DeFi lending protocols. A token backed by U.S. Treasuries and maintaining a $1.00 price provides higher-quality collateral than volatile crypto assets, potentially enabling lower collateral ratios and more capital-efficient lending markets.

Stablecoin Reserve Backing

Some stablecoin issuers use tokenized treasury products as part of their reserve stack. Rather than holding Treasuries through traditional custody channels, an issuer can hold BUIDL or USYC as on-chain proof of backing while simultaneously earning yield on those reserves. This creates a transparent, verifiable reserve structure that can be audited by anyone with a block explorer.

24/7 Settlement

Traditional money market funds operate on banking hours. Subscriptions placed after the cutoff settle the next business day. Redemptions follow the same pattern. Tokenized funds enable round-the-clock settlement: subscription and redemption can occur on weekends, holidays, and at 3 AM. For global institutions operating across time zones, this eliminates settlement gaps that can leave capital unproductive for days.

Risks and Limitations

Smart Contract Risk

The tokenization layer introduces smart contract risk absent from traditional funds. A bug in the token contract, the redemption module, or the cross-chain bridge could result in loss of funds or inability to redeem. BUIDL's use of Wormhole for cross-chain functionality adds bridge-related risk, though Wormhole has undergone extensive auditing since its 2022 exploit.

Concentration Risk

Several tokenized treasury products exhibit high holder concentration. USYC's early 2026 distribution showed Binance holding 94% of outstanding supply. Single-entity dominance creates redemption risk: a large withdrawal from one holder could force the fund to liquidate Treasuries at unfavorable prices, though money market instruments are among the most liquid assets in existence.

Regulatory Uncertainty

While SEC-registered products like FOBXX operate under established frameworks, many tokenized treasury products rely on securities exemptions (Regulation D, Regulation S) that restrict who can hold them. Transfer restrictions encoded in smart contracts (whitelisted wallets, KYC-gated transfers) limit composability and liquidity. If regulators reclassify any of these products, existing holders could face forced redemptions or transfer freezes.

Interest Rate Sensitivity

Tokenized treasury funds have grown during a period of relatively high short-term rates. If the Federal Reserve cuts rates significantly, the yield advantage over stablecoins narrows, and the operational complexity of holding a tokenized security rather than a simple stablecoin becomes harder to justify. The category's growth is partially a product of the rate environment, not solely a reflection of structural advantages.

The Multi-Chain Expansion

The race to deploy tokenized treasury products across multiple blockchains mirrors the earlier multi-chain stablecoin expansion. BlackRock's BUIDL now spans seven chains. Franklin Templeton's BENJI covers eight. Ondo's USDY is available on seven networks. The logic is the same: liquidity fragments across chains, and fund issuers want to meet institutional demand wherever it concentrates.

Cross-chain interoperability introduces its own complexity. BUIDL uses Wormhole for cross-chain transfers, while other products rely on native deployments with separate liquidity pools per chain. For an institutional buyer, the choice of chain matters: gas costs on Ethereum differ substantially from Solana or Avalanche, and not all chains offer the same depth of DeFi integration for yield-bearing collateral.

Where Tokenized Treasuries Meet Stablecoin Ecosystems

The most compelling near-term application for tokenized treasury funds is integration with stablecoin ecosystems. Idle stablecoin balances represent billions of dollars in foregone yield. When a user holds $10,000 in USDC or USDB waiting for a payment or deployment, that capital could be earning Treasury yields through automated sweep mechanisms.

Spark's stablecoin infrastructure, which supports USDB on Bitcoin's Layer 2, sits at an interesting intersection with this trend. Stablecoin balances held on Spark could connect to on-chain yield protocols that route idle capital into tokenized Treasury products, enabling users to earn risk-free rates on dormant balances while maintaining instant access for payments. As the boundaries between tokenized deposits, stablecoins, and money market funds continue to blur, protocols that can bridge these categories will capture outsized value.

The broader RWA tokenization movement extends well beyond treasuries into private credit, equities, and commodities. But tokenized treasury funds are the proving ground: if traditional finance can tokenize the simplest, safest instrument successfully, the infrastructure and regulatory frameworks built for T-bills will eventually support far more complex assets.

What Comes Next

BlackRock's May 2026 SEC filing to offer on-chain shares of its $7 billion money-market fund suggests that tokenized treasuries are moving from standalone products to features embedded within existing fund structures. Rather than launching new crypto-native funds, incumbents may add blockchain-based share classes to their existing product suites.

This trajectory points toward a future where the distinction between tokenized and non-tokenized fund shares dissolves. A money market fund share is a money market fund share, whether it settles through DTCC or Ethereum. The competitive advantage shifts from novelty (we tokenized a fund) to infrastructure (we settle faster, cheaper, and with better composability).

For developers building stablecoin and payment applications, the integration path is becoming clearer. Explore how Spark's SDK enables stablecoin infrastructure that can connect with yield-bearing instruments, or see the full landscape of yield-bearing stablecoins for a deeper comparison of how different products handle the yield-versus-payments tradeoff.

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.