Tokenized Treasury Funds Explained: How On-Chain T-Bill Products Actually Work

Tokenized Treasury funds have grown from almost nothing in 2023 to roughly $9.2 billion in assets by early 2026, with estimates running to $11-15 billion by mid-year. The headline fact you need before anything else: these products pay the same yield as a plain T-bill, not more. You are buying a permissioned blockchain share register on a fund that holds Treasuries, and the "tokenized" part changes settlement mechanics, not your return.

If you have heard about BlackRock's BUIDL fund or Franklin Templeton's BENJI and assumed you were looking at some new crypto-native yield product, you were not. These are SEC-regulated securities. The fund itself holds cash, Treasury bills, and repurchase agreements, the same instruments a conventional government money market fund holds. What is different is the record of who owns what. Instead of a transfer agent updating a database entry, ownership lives on a blockchain, and BlackRock's fund, for instance, carries a Moody's AAA-mf rating and is described in detail in this walkthrough of BUIDL's structure. Once you understand that the wrapper is the innovation and the underlying asset is not, the rest of this category becomes much easier to evaluate.

This matters for accredited investors specifically because most of these products are legally closed to everyone else. Understanding the mechanics, the actual named products, and the honest yield math is the difference between adding a genuinely useful settlement tool to a portfolio and paying for a marketing story.

What a Tokenized Treasury Fund Actually Is

Strip away the branding and a tokenized Treasury fund has three components. First, a registered fund entity, usually structured to fall within an exemption from the Investment Company Act of 1940 or, in Franklin Templeton's case, registered under the 1940 Act outright. Second, a portfolio of short-duration government paper: T-bills, overnight repo, and sometimes agency debt. Third, a share register maintained on a blockchain instead of, or alongside, a traditional transfer agent ledger. That third piece is where "tokenization" happens. Each token represents one share (or a fraction of one) in the fund. When BlackRock's BUIDL fund mints a token, it is issuing a share of a Delaware fund that happens to price at a stable $1.00 net asset value and pays daily accrued dividends, distributed monthly via new token issuance rather than a cash distribution. Custody of the underlying Treasuries sits with conventional institutional custodians. BUIDL's assets, for example, are held in custody arrangements involving BNY Mellon, one of the largest custodian banks in the world, not some crypto exchange wallet.

None of this is a stablecoin. A stablecoin is typically an unregistered liability of a private issuer, redeemable at the issuer's discretion, with no securities registration and no direct claim on a specific portfolio of assets in the way a fund share carries one. A tokenized Treasury fund share is a security. It has a prospectus or private placement memorandum, an administrator, an auditor, and in BUIDL's case, an actual credit rating from Moody's. If you have been mentally filing these products next to Tether or USDC, separate them now. The token is the share certificate. The fund is the product.

The Mechanics: Subscription, Redemption, and the Allowlist

Getting into and out of these funds does not look like buying crypto on an exchange. Most tokenized Treasury funds run on a permissioned model with several gates stacked on top of each other.

• KYC and accreditation verification. Before a wallet address can hold or transfer fund tokens, the investor completes identity verification and, for Reg D 506(c) offerings, accreditation verification. This happens off-chain through the fund's transfer agent or a platform like Securitize, which handles BUIDL's tokenization infrastructure.
• The allowlist. Once approved, the investor's wallet address is added to a smart-contract-enforced allowlist. The token contract will not execute a transfer to or from any address that is not on that list, a design detail the Tokenized US Treasuries Tracker flags as the defining feature separating these funds from open crypto tokens. You cannot send BUIDL tokens to a friend's Coinbase wallet. The contract will simply reject the transaction.
• Subscription. An approved investor wires or sends stablecoin payment to the fund, and shares are minted to their allowlisted wallet, typically same-day or next-day depending on the fund's cutoff times.
• Redemption. The investor requests redemption, tokens are burned, and cash (or in some structures, a stablecoin) is returned. BUIDL, notably, offers same-day redemption liquidity in some configurations through a smart contract that lets holders convert directly to USDC, a feature built specifically because institutional users wanted faster settlement than the traditional next-day fund redemption cycle.

Custody of the tokens themselves generally requires either a qualified custodian's wallet infrastructure or a self-custody wallet that has been through the allowlist process. Either way, the fund administrator and custodian retain full records off-chain as well. The blockchain ledger is, in effect, a real-time mirror of the official books, not a replacement for them, a distinction the European Central Bank flagged clearly in its 2026 bulletin on tokenized money market funds, which frames the category as "new technology, familiar risks."

The Named Products and Their Actual Size

Three products anchor this market, and their scale differs by an order of magnitude in places, per the tracking data compiled in the Tokenized US Treasuries Tracker.

Product	Issuer	Chain(s)	Approx. AUM (mid-2026)	Access
BUIDL	BlackRock (via Securitize)	Ethereum + 7 others	$2.5-2.9B	Reg D 506(c); $5M individual / $25M institutional minimum
BENJI	Franklin Templeton	Stellar (plus others)	Smaller than BUIDL, retail-scale	'40 Act registered fund; $20/1-share minimum, retail-accessible
OUSG	Ondo Finance	Ethereum + others	$0.6-0.7B	Permissioned, accredited-oriented; holds BUIDL as part of underlying portfolio

BlackRock's BUIDL launched on Ethereum in March 2024 and has since expanded across eight blockchains, a build-out detailed in this guide to BUIDL's structure and custody arrangements. It carries a $5 million minimum for individual investors and $25 million for institutions, which tells you plainly who this product is built for. It is not a retail product wearing a blockchain costume. It is an institutional cash-management tool that happens to settle on-chain.

Franklin Templeton's BENJI is the outlier, and it matters precisely because it breaks the pattern. BENJI wraps the Franklin OnChain U.S. Government Money Fund (ticker FOBXX) and launched on the Stellar network in April 2021, making it the first U.S.-registered, 1940 Act tokenized money market fund. Because it is registered under the Investment Company Act rather than sold under a Reg D private placement exemption, it does not require accredited investor status. A retail investor can open an account with a $20 minimum and buy a single tokenized share. If you are looking for the one entry point in this category that does not require a six or seven-figure check and an accreditation letter, BENJI is it.

Ondo Finance's OUSG sits in between. It is smaller in absolute AUM than BUIDL and structured for accredited and qualified purchasers, and part of its underlying portfolio is itself invested in BUIDL, making OUSG something like a fund of a fund in tokenized form. Ondo has layered additional features on top, including integrations meant to make OUSG usable as collateral in decentralized finance applications, which is a genuinely different use case from simply parking cash in T-bills, and worth separating mentally from the base product.

The Yield Question, Answered Honestly

Here is the part of the pitch that needs the most scrutiny: does tokenization get you a better yield than a plain T-bill or a conventional government money market fund? The answer, consistently, is no.

OUSG's yields track the Fed Funds rate and T-bill curve closely, clustering in a 3.4% to 5.2% APY range depending on the rate environment, which is exactly what you would expect from a fund holding the same instruments as any other short-duration Treasury vehicle. BUIDL pays a comparable rate net of its fee structure. There is no arbitrage here, and there should not be. A T-bill is a T-bill regardless of whether the share register lives on Ethereum or in a transfer agent's SQL database. The government is not paying a premium for blockchain settlement. What you are actually trading, when you choose a tokenized structure over a conventional Treasury money market fund or buying bills directly, is settlement speed and composability against a set of risks that a traditional fund does not carry: smart contract risk, blockchain infrastructure risk, and the operational risk of a still-young permissioning and custody stack. You take on that additional risk surface for the same return you could get from a decades-old money market fund with a mature compliance and custody history. That is the trade, stated plainly, and it is the single most important number in this article: same yield, extra risk, no premium.

Who Can Actually Buy These

Access is the least understood part of this category. Most tokenized Treasury products, including BUIDL and OUSG, are sold under Regulation D 506(c), which restricts the offering to accredited investors and, in many cases, qualified purchasers with meaningfully higher net worth or investment thresholds. That is a legal gate, not a technology gate. No amount of wallet sophistication gets you past it. A fund administrator has to verify your accreditation status before your address is ever allowlisted. BENJI is the exception because Franklin Templeton chose the more burdensome path of full 1940 Act registration instead of a private placement exemption, which is also why it can carry a $20 minimum instead of a multi-million-dollar one. If a product in this space is marketed to you with a low minimum and no accreditation questionnaire, check its registration status before assuming it works like BUIDL. The regulatory wrapper, not the chain it runs on, decides who is allowed in the door.

Risks and What Is Still Unproven

The underlying Treasury exposure is about as safe as dollar-denominated fixed income gets. The tokenization layer is where the open questions sit. Smart contracts that manage minting, burning, and allowlisting have not existed through a full market cycle, and a bug or exploit in that contract layer is a risk category traditional money market funds simply do not have. Custody arrangements, while backed by institutions like BNY Mellon, still depend on newer operational processes for reconciling on-chain token supply against off-chain fund records, and any mismatch is a problem regulators and auditors are actively working through, per the ECB's own framing of "familiar risks" wearing new technology. Liquidity is another open question. Same-day redemption features, like BUIDL's USDC conversion mechanism, depend on the fund maintaining sufficient reserves or credit lines to honor redemptions instantly, a feature that works well in calm markets and has not been stress-tested in a genuine liquidity crunch. And because most of this market is still concentrated in three or four issuers, an operational failure, legal dispute, or regulatory action against any single large issuer could disproportionately affect total category AUM and investor confidence in the wrapper generally, even if the underlying Treasuries are untouched. None of this makes tokenized Treasury funds dangerous in the way a leveraged crypto trade is dangerous. It makes them a new operational stack layered on top of an old, safe asset, and new stacks carry bugs that old stacks have already found and fixed.

Frequently Asked Questions

Are tokenized Treasury funds the same thing as stablecoins?

No. A stablecoin is typically an unregistered liability of a private issuer with no direct fund registration, while a tokenized Treasury fund share is a registered security representing a claim on a specific portfolio of Treasuries and cash instruments held with a traditional custodian.

Do tokenized Treasury products pay a higher yield than a regular T-bill?

No. Yields on products like Ondo's OUSG track the same Fed Funds and T-bill rates as conventional government money market funds, generally in the 3.4% to 5.2% APY range depending on the rate environment, with no structural premium for the blockchain wrapper.

Can a retail, non-accredited investor buy into this category at all?

Mostly no. Products like BlackRock's BUIDL and Ondo's OUSG are sold under Reg D 506(c) to accredited investors and qualified purchasers only, though Franklin Templeton's BENJI is a 1940 Act registered fund with a $20 minimum that does not require accreditation.

Who actually holds the Treasuries backing these tokens?

Traditional institutional custodians hold the underlying assets. BlackRock's BUIDL fund, for example, uses custody arrangements involving BNY Mellon, one of the largest custodian banks globally, with the blockchain serving as the real-time share register rather than the asset custodian.

Related Coverage on AIN

• Rule 506(c) and Tokenized Securities: What the SEC's July 2026 Guidance Means for Accredited Investors
• Securitize Registers as SEC Investment Adviser: What Tokenized Fund Compliance Means for Investors
• Tokenized Pre-IPO Shares Go Mainstream Overseas: Why US Investors Should Pump the Brakes

Author Disclosure: Jeff Barnes, MBA has no personal position in any company, fund, or platform named in this article. Angel Investors Network has no current commercial relationship with any party mentioned. AIN provides marketing and education services, not investment advice. Past performance does not guarantee future results. All investments involve risk, including loss of principal.