What Are Tokenized Treasuries?

Tokenized treasuries are products that record the rights to a treasury investment as blockchain tokens. The most common form is a fund investing in short-term US Treasuries that issues its shares on-chain. Holders usually don’t own the treasuries themselves but shares in a fund or special purpose vehicle (SPV); they earn treasury yield and can transfer, subscribe and redeem on-chain. Tokenized treasuries are one of the largest categories of real-world asset tokenization.

What Rights Do Tokenized Treasuries Represent?

Most tokenized treasuries are funds: the fund uses investors’ money to buy short-term treasuries and repos, which are held by a custodian bank, while the fund shares are recorded on the blockchain as tokens. In other products, an SPV holds the treasuries and issues tokens representing rights to them.

So investors hold rights against the fund or entity, not a specific treasury directly. Which rights a token represents depends on the product’s tokenization structure and offering documents, so read them carefully before buying.

How Do Tokenized Treasuries Generate and Distribute Yield?

Yield comes from the interest on the underlying treasuries and is distributed in two main ways. In one, the number of tokens stays the same while the NAV per token rises over time, and redemption returns funds at the higher NAV. In the other, each token stays at about $1 and yield is paid periodically as new tokens sent to the holder’s address.

This is the biggest difference from stablecoins. In the US, for example, payment stablecoin issuers cannot pay interest to holders, so the treasury yield on stablecoin reserves goes to the issuer; tokenized treasuries pass the yield to investors. It mirrors the difference between tokenized deposits and stablecoins: stablecoins are more like cash, while tokenized treasuries are more like an investment.

Who Can Buy and Hold Tokenized Treasuries?

Tokenized treasuries are securities or fund products, mostly open only to qualified investors or institutions that pass identity verification, and some also restrict investor jurisdictions and set minimum subscription amounts. Token contracts usually include a whitelist, so only registered addresses can send and receive tokens, and issuers retain the power to freeze and force-transfer them.

This means tokenized treasuries cannot be sent freely to anyone the way stablecoins can. Businesses must register their holding addresses on the issuer’s whitelist and make sure the private keys for those addresses are never lost or leaked.

What Do Businesses Use Tokenized Treasuries For?

The most common use is converting stablecoins that aren’t needed right now into tokenized treasuries to earn yield, then redeeming them when needed, with the funds staying on-chain throughout. They are also starting to be used as trading margin and as reserve assets for stablecoins and other tokenized products.

What Are the Risks of Tokenized Treasuries?

Treasuries themselves carry very low credit risk, but tokenization adds new risks in issuance and custody, redemption, smart contracts and private key security. These are how the main risks of RWA play out in treasury products.

Conclusion

Tokenized treasuries bring treasury fund shares on-chain, giving holders treasury yield while keeping the convenience of on-chain transfers and fast subscription and redemption. They are well suited to managing idle cash and serving as collateral, but businesses need to understand the legal rights behind the token, the redemption rules and the address management requirements.