Tokenized Treasuries Will Bring TradFi On-Chain: S&P Global

• SP Global Ratings bets on tokenized treasuries.
• Cites Blackrock’s BUIDL fund as proof of the trend. 
• Tokenized treasuries use public blockchains like Ethereum.

Crypto supporters have long anticipated the integration of traditional finance and blockchain. According to the financial analytics firm SP Global, this may soon become a reality. 

The firm has recently highlighted the growing importance of asset tokenization , tokenized treasuries in particular. These digital tokens, backed by U.S. government obligations, are gaining traction among institutional investors.

Tokenized Treasuries Are Gaining Traction: SP Global

On Tuesday, May 14, financial analytics firm SP Global published a report on Tokenized Treasuries , focusing on their potential to transform financial markets. Tokenized Treasuries are digital tokens created on blockchains like Ethereum but also backed by U.S. government obligations. 

The firm claims significant momentum is behind Tokenized Treasuries, which so far amassed over $1 billion in outstanding value. For instance, Blackrock’s BUIDL fund, introduced in March this year, attracted over $240 million in investments within the same week. 

Blackrock’s BUIDL fund currently stands at $381 million . It works on the Ethereum blockchain and allows investors to redeem their shares for USDC stablecoin without intermediaries. Similarly, Franklin Templeton’s FOBXX fund has enabled peer-to-peer transfers of tokens on Stellar and Polygon blockchains. 

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These developments show that mainstream financial institutions are starting to understand the benefits of tokenized assets, especially treasuries. 

What Are the Benefits of Tokenized Treasuries 

According to SP Global, tokenized treasuries offer several benefits compared to traditional treasuries. These mainly center around greater liquidity, especially during market volatility. In particular, when many investors seek to redeem their shares simultaneously, they expose the fund to liquidity risks. 

In contrast, Tokenized Treasuries, such as Blackrock’s BUIDL fund, provide investors with continuous access to liquidity on-chain. Moreover, investors can use their Tokenized Treasuries as collateral rather than redeeming their shares, reducing the risk of a fund run.

Another benefit of tokenized treasuries for traditional investors is faster settlement and easier international fund transfers. Investors can easily convert these treasuries to digital assets on public blockchains and send them across the globe faster and with less oversight than traditional finance.   

However, SP Global also foresees some challenges with tokenized treasuries. For one, interoperability is a major concern, as investors may need to transfer their funds from one chain to another. Similarly, regulatory issues, particularly with stablecoins , remain a major potential roadblock for further adoption. 

On the Flipside

• Back in July 2023, investors had already poured $600 million into tokenized treasuries. 
• Various blockchains are competing for the tokenized treasury market. For instance, Switzerland-based Backed Finance recently expanded its tokenized US treasury offering to Base . 

Why This Matters

Tokenized treasuries showcase the use cases of blockchain in traditional finance. Critically, they use public blockchains like Ethereum and Base rather than private blockchains managed directly by banks.   

Read more about Base’s role in the expanding industry of tokenized treasuries: 
Base Dominates Tokenization with On-Chain Treasuries

Read more about Binance’s latest bid to attract retail investors: 
Binance’s New Trading Bot Enables Everyone to Do Arbitrage