Tokenized Treasuries in 2026: How a $20B Market Matured in Two Years

Tokenized Treasuries in 2026: How a $20B Market Matured in Two Years

In early 2023, the tokenized treasuries market was under $1B. By early 2026, it has crossed $20B making it the single largest vertical in the RWA ecosystem. BlackRock, Franklin Templeton, and Fidelity now operate tokenized funds. Ondo Finance has become one of the most used protocols in DeFi. And DAOs are increasingly holding T-bill tokens instead of stablecoins for their treasury assets.

Here is a complete breakdown of how tokenized treasuries work, what distinguishes the leading products, and what to check before allocating.

What Is a Tokenized Treasury?

A tokenized treasury is a blockchain-based token that represents ownership in a fund or vehicle holding short-term US government debt. The most common underlying assets are 3-month and 6-month Treasury bills, and money market funds invested in T-bills.

When you buy OUSG from Ondo Finance, for example, you are buying a token that represents a proportional share in a fund that holds short-term US Treasuries. The NAV (net asset value) of your token increases daily as interest accrues. You can redeem your tokens for USDC (or sometimes USD) through the protocol's redemption mechanism.

The key innovation is not the asset class T-bills have existed for decades. The innovation is the wrapper: a freely transferable on-chain token that can be held in a wallet, used as DeFi collateral, transferred instantly across borders, and divided into fractions of any size.

The Major Protocols in 2026

Ondo Finance OUSG and USDY Ondo is the market leader by AUM. OUSG (Ondo Short-Term US Government Treasuries) is backed by short-duration T-bills and targeted at institutional investors. USDY (Ondo US Dollar Yield) is a more accessible product targeting a broader user base. Ondo has partnered with BlackRock's BUIDL fund as the primary underlying vehicle for OUSG, which significantly increases the quality of the custody and audit infrastructure.

BlackRock BUIDL BlackRock's BUIDL fund is the first tokenized fund from the world's largest asset manager. It is not directly accessible to retail investors but serves as the underlying vehicle for several consumer-facing protocols including Ondo. Its presence in the market is important for legitimacy and custody quality benchmarking.

Franklin Templeton BENJI Franklin Templeton's OnChain US Government Money Fund (BENJI token) operates on Stellar and Polygon. It is one of the few tokenized fund products that records ownership directly on-chain rather than using a traditional transfer agent with a blockchain overlay.

Backed Finance Backed Finance tokenizes ETFs and government bonds for non-US investors who cannot access the Ondo or Franklin Templeton products due to regulatory restrictions. Products include bIB01 (short-term US Treasury ETF) and bC3M (3-month European government bond exposure).

Matrixdock and OpenEden Two Singapore-based protocols serving the Asian market. Both offer T-bill exposure with daily redemption windows and have grown significantly as Asian DAOs and institutions have sought USD-denominated yield products.

Key Metrics to Evaluate Before Investing

Not all tokenized treasury products are equal. The headline yield is the least important metric to compare because most products track the same underlying benchmark (3-month T-bill rate, currently around 4.8–5.2% depending on the product). The differentiators are everything else.

NAV accuracy and frequency. How often is NAV calculated and updated? Daily is standard. Intraday is rare but exists. Check whether there is a systematic premium or discount to the calculated NAV in secondary market trading persistent discounts are a liquidity warning.

Redemption terms. What is the redemption window? Same-day, T+1, T+2, or longer? What is the minimum redemption amount? Is there a redemption fee? Is there currently a redemption queue with pending withdrawals? A growing queue is a meaningful risk signal.

Custody and auditor quality. Who holds the underlying T-bills? Major custodians (Clear Street, BNY Mellon, State Street) provide meaningfully better protection than obscure or offshore custodians. Who audits the reserves? Attestation frequency matters weekly is better than monthly.

Smart contract audit history. Has the token contract been audited by a reputable firm? Have there been any known vulnerabilities or incidents?

Underlying asset composition. What exactly does the fund hold? Pure T-bills are the most liquid and low-risk. Mixed funds that include money market instruments or repo agreements have slightly different risk profiles. The prospectus and documentation should specify this clearly.

Why DAOs Are Switching From Stablecoins to Tokenized Treasuries

One of the most significant structural trends in 2025–2026 has been the migration of DAO treasury assets from idle stablecoins to tokenized T-bill products. The math is simple: a DAO holding $50M in USDC earns 0%. The same $50M in OUSG earns approximately $2.5M per year at current rates.

Major DAOs including MakerDAO (now Sky), Uniswap, and Aave have all passed governance proposals to allocate meaningful portions of their treasury to RWA yield products. This institutional adoption is one of the key drivers of the tokenized securities market's growth from $1B to $20B.

The Risks That Don't Get Talked About Enough

Tokenized treasuries are often marketed as the "safe" part of the RWA market. Compared to credit pools, they are. But they carry risks that are systematically underemphasized.

Regulatory risk is real. The SEC has been relatively accommodating of tokenized fund structures so far, but the regulatory framework is not finalized. A change in classification or registration requirements could force fund closures or restrict redemptions.

Access restrictions matter. Most tokenized treasury products require KYC/AML verification. Several restrict access to non-US investors, accredited investors, or investors from specific jurisdictions. Always verify eligibility before allocating.

Smart contract risk applies even to "safe" assets. The token is only as good as the contract. A bug in the redemption mechanism could lock funds even if the underlying T-bills are perfectly fine.

Counterparty concentration at the protocol level is underappreciated. If Ondo's OUSG represents 30% of the entire tokenized treasury market, a problem at Ondo creates systemic risk for the entire vertical.

The tokenized treasury market is genuinely innovative and genuinely useful. But it rewards investors who do their due diligence not those who assume that a government bond wrapper is automatically safe.