The Billion-Dollar Breakthrough: Tokenized Treasuries Set New DeFi Standard
From Stability to Yields: Unveiling the future of asset-backed tokens in a decentralized world
Tokenized treasuries have surpassed the $1 billion mark, signaling the evolution in the world of stablecoins. This marks a new era for asset-backed tokens, transitioning from stability to offering yields. In mid-March, Blackrock announced its first tokenized treasury, a pioneering move that attracted over a quarter billion dollars in just 10 days. This surge increased the total value of tokenized treasuries from $800 million to over a billion. Additionally, it brought much-needed legitimacy to the tokenization of real-world assets (RWA), and public blockchains, earning similar statements from Goldman Sachs’ head of digital assets.
This breakthrough is significant for decentralized finance (DeFi), as major institutions begin to engage with the space, offering products that represent an evolution from earlier solutions, such as stablecoins. Stablecoins serve as a cornerstone of the DeFi ecosystem due to their low volatility and peg to major fiat currencies, facilitating access to decentralized finance applications, serving as a temporary trading position, and enabling transaction settlement, among other uses.
Initially, to avoid regulatory scrutiny, especially from authorities like the SEC, the first versions of such tokens did not share with token holders the interest generated from their reserves. Instead, the interest served as a financing mechanism for operations and profit generation for issuers. Tether, for example, reported net profit of over $2.85 billion in Q4 2024, with about $1 billion attributed to interests from US Treasuries. Stablecoin holders could only earn yields by participating in DeFi applications like lending or liquidity pools, which introduce a risk factor and are not suited for all types of investors.
Stablecoins have been effective in the market, constituting about 10% of the total market cap and they increasingly dominate on-chain transaction value, with stablecoins accounting for about 60% of total transactions.
Franklin Templeton was the first to address this significant issue by introducing Benji in mid-2023, a fully SEC-compliant tokenized money market fund (MMF). This innovation indicated that traditional finance (TradFi) players are keenly interested in DeFi, despite the initial limitation of not being tradable or usable across DeFi applications.
The early success of Benji encouraged other companies like BlackRock, Ondo Finance, Superstate and Hashnote to launch SEC-compliant tokens usable across DeFi that offer interest, essentially risk-free. However, these tokens typically require large minimum investments, making them less attractive for retail holders.
In contrast, entities like Mountain Protocol, Ethena Protocol, and the Liquity Protocol teams are creating the next generation of interest-bearing stablecoins without minimum investment requirements. These next-gen stablecoins could possibly lack the regulatory oversight, the transparency, and the protections offered by tokenized treasuries, so potentially introducing other risks related to the ways the interest is generated.
Just as USDT paved the way for other types of stablecoins like the overcollateralized DAI, I anticipate a new generation of stablecoins that leverage these yield-bearing tokens as reserves to democratize the yield benefits for all user types and risk profiles.
The beginning of real-world asset (RWA) tokenization offers institutional holders the chance to experience 24/7 trading with instant settlement, increased transparency, and improved capital efficiency at lower costs. Following treasuries, other financial products and commodities such as gold may also be tokenized, broadening access to previously unavailable investment products, always assuming that challenges like liquidity and regulations are addressed in time to further propel this wave of innovation.
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Disclaimer: I am not a financial or tax advisor. These are personal views and do not constitute financial and/or tax advice. Do your own research prior to making any financial decision and/or using any financial product.
