It was not long ago that decentralized finance (DeFi) was a completely crypto-native space, with staked Ethereum, wrapped Bitcoin, and algorithmic stablecoins. The vision was that DeFi could create its own collateral without relying on traditional methods. However, tokenized U.S. Treasury bills have become the new foundation of on-chain finance, exceeding $9 billion by the end of 2025.
This article explains how the tokenized Treasury bills became a cornerstone in the DeFi market.
The growth of the tokenized Treasury market is both sudden and exponential. Between early 2024 and late 2025, the total assets under management across all issuers increased from $2 billion to $9 billion, a 350% rise in just over 18 months. Major factors responsible for this rapid development include:
Here is the basic process of how tokenized treasury bills operate from issuance to yield:
When BlackRock rolled out BUIDL in March 2024, it was a move that caught the attention of the entire industry. Quickly, the fund broke $1 billion in assets under management and eventually reached a peak of around $2.9 billion in mid-2025, accounting for over 40% of the total market. It is now accepted as collateral on Deribit and Crypto.com, extending its utility well beyond passive yield generation.
Franklin Templeton took a different approach with the introduction of its OnChain US Government Money Fund called BENJI. This tokenizes the shareholder register so that each BENJI token represents a single fund share, with on-chain documentation.
Ondo Finance and Superstate have catered to the DeFi-native market, building products that are more deeply integrated with lending protocols and automated strategies. Others include Circle, with its USDC yield offering, while OpenEden expands access to the asset class.
DeFi protocols, such as MakerDAO and Frax, have shifted their reserve collateral from crypto assets to Treasuries and repurchase agreements. This stabilizes the underlying assets and, in a high-interest rate regime, provides a source of yield that can be distributed to users.
Pendle Finance has built on-chain yield curves that reference tokenized Treasury rates, enabling traders to speculate or hedge against future rates with DeFi tools. Furthermore, JPMorgan launched a tokenized money market fund on Ethereum to leverage the benefits of 24/7 settlement and stablecoin infrastructure.
The effect of this is that DeFi’s monetary base now serves as a blend of stablecoin reserves and RWA-backed securities, with U.S. government debt at its core. Also, regulatory clarity provided by SEC Commissioner Hester Peirce on tokenized securities has encouraged asset managers to move from pilot programs to scaled products.
Liquidity and maturity mismatches between the tokens and the underlying assets could pose a pressure situation during bulk redemption. The TBAC pointed out that the demand for Treasury bills, fueled by stablecoins, could pose a fire sale risk to the market during a run. BlackRock’s BUIDL itself experienced around $447 million in outflows in August 2025, a reminder that even the most successful product is not immune to capital rotation.
Smart contract risks, counterparty risks in custody models, and the secondary market liquidity of the products are also factors that investors need to evaluate carefully.
Tokenized Treasury bills have transitioned from an experiment to infrastructure in less than two years. With assets of close to $10 billion, institutional issuers, regulatory support, and a strong DeFi ecosystem integration, this market has become a bridge between traditional fixed income markets and on-chain finance. Whether this will develop into an open financial system or just an efficient version of the current one will be determined by the level of interaction between issuers, regulators, and the DeFi ecosystem.
