Tokenized money market funds can meet similar investor needs in digital form while unlocking new advantages, including greater settlement flexibility, portability and collateral efficiency, and are expected to enhance financial stability through faster and more transparent redemption processes.
Author: Will Awang , Investment and Financing Lawyer specializing in Web3 & Digital Assets; Independent Researcher specializing in Tokenization, RWA, Payments, and DeSci
Digitalization and the development of the financial industry have long been inseparable. In recent decades, electronic systems have replaced physical trading of stocks and bonds, and online platforms have allowed investors to directly manage their portfolios. Today, digital assets, from cryptocurrencies to tokenized securities, are driving the next wave of financial innovation and rapidly entering the mainstream market.
Although cryptocurrencies and stablecoins pioneered early exploration in the market, tokenized money market funds (MMFs), with their characteristics that align with traditional financial logic, have truly gained the focus of traditional financial institutions and are becoming the next cutting-edge track in the digital finance field.
Tokenized money market funds can meet similar investor needs in digital form while unlocking new advantages, including greater settlement flexibility, portability and collateral efficiency, and are expected to enhance financial stability through faster and more transparent redemption processes.
I. Behind the $10 billion scale
By the end of January, the total size of tokenized US Treasury bonds approached $10 billion, a milestone that confirms the category has moved from the proof-of-concept stage to a new phase of operational infrastructure. Behind this achievement, something equally important is happening: Circle's USYC has slightly surpassed BlackRock's BUIDL to become the largest tokenized Treasury bond product.
As of January 22, USYC had $1.69 billion in assets under management, while BUIDL had $1.684 billion, a difference of approximately $6.14 million, or 0.36%.
This signal indicates that distribution channels and collateral mechanisms are now more important than brand awareness in determining which type of on-chain cash equivalent will prevail.
Over the past 30 days, USYC's assets under management have grown by 11%, while BUIDL's have shrunk by 2.85%. This divergence is not simply due to marketing success, but rather reflects a continuous inflow of net funds into one company while the other faces a continuous outflow of funds due to redemptions.
This is not a story of Circle defeating BlackRock in a brand battle, but rather the design advantages of the collateral transfer process overcoming the cognitive advantages of brand identity.
Furthermore, this phenomenon directly points to the core infrastructure issue that regulators and institutional investors are currently discussing publicly: who should build the underlying architecture to transform idle funds in the crypto space into effective collateral that can generate returns?
II. Distribution and mortgage empowerment outweigh brand halo.
USYC's core structural advantage lies in its distribution capabilities achieved through exchange-based staking channels.
On July 24, Binance announced that institutional clients could hold USYC and use it as off-exchange collateral for derivatives, with custody handled by a third-party bank custodian or Ceffu, and redemption to USD stablecoins (USDC) almost instantly. Binance didn't include BUIDL in its off-exchange collateral list until November 14, four months later.
The timing of this development is crucial. If the cash-backed system is established first in the prime brokerage business and derivatives trading process, products that are integrated earlier will have a firm grip on cash flow. USYC is not merely a listing platform; it is deeply embedded in the underlying operations that manage institutional margin and automate collateral transactions.
Circle completed its acquisition of Hashnote in January 2025. USYC is explicitly positioned as interest-bearing collateral that can be circulated through the USDC ecosystem. This means that institutions that have already completed stablecoin fund transfers through the Circle ecosystem can quickly access USYC without building new operational channels. Circle plans to incorporate Hashnote's tokenized money market fund into its Bermuda-licensed regulatory system, leveraging the mature local digital asset regulatory framework to optimize USYC's compliant operation and cross-regional expansion.
I remember in an interview before Hashnote acquired USYC, its CEO clearly stated that USYC's use as collateral and margin in various scenarios was a key difference between it and other interest-bearing stablecoins.
While BlackRock's BUIDL leveraged its brand influence to enter the crypto market, it failed to integrate into the native crypto collateral system with a similar plug-and-play approach. I previously believed BUIDL could achieve a complete market dominance, but current market results have proven this judgment flawed. This reflects the fundamental question facing the VC industry: when leading institutions like BAI enter the market, what exactly is your core competitive advantage?
( Analyzing BlackRock's tokenized fund BUIDL, opening a beautiful new world of DeFi for RWA assets )
III. Product Mechanism Adaptation to Transaction and Collateral Scenarios
The RWA.xyz platform clearly distinguishes between the two products in the "Use of Income" section: USYC is labeled "Accumulates," meaning that interest is directly credited to the token balance to achieve compound interest growth; while BUIDL is labeled "Distributes," meaning that income is paid out independently.
This difference is a fundamental, systemic distinction , not a superficial one. Collateral systems (especially automated margin and derivatives infrastructure) prefer a "one-time setup, no intervention" balance model, allowing asset value to grow automatically through compound interest without the need for manual processing of payouts.
Compared to distribution structures, accumulation structures can be integrated more seamlessly into automated collateral processes. For institutions building scalable collateral channels across multiple trading venues and counterparties, the simpler the product structure, the lower the operating costs and friction losses.
RWA.xyz has set substantial different entry thresholds for its two products: BUIDL is only open to qualified U.S. investors, requiring a minimum investment of 5 million USDC; while USYC is open to non-U.S. investors, with a minimum investment of 100,000 USDC.
The two companies have structural differences in their customer selection logic. In the United States, individuals need to hold $5 million in investable assets to qualify as qualified investors, while institutions need to reach $25 million. This threshold excludes the vast majority of crypto-native funds, proprietary trading teams, and small and medium-sized institutions.
The USYC's minimum threshold of $100,000 and non-US access rules open the door to a wider range of offshore institutions, family offices, and trading companies—entities that, while operating outside the US regulatory system, still require dollar-denominated, profitable collateral.
BlackRock's brand influence is undeniable, but brand cannot supersede access restrictions: if a fund does not meet the qualified investor threshold or operates outside the U.S., it cannot choose BUIDL, while USYC becomes a viable option.
The target market for on-chain collateral is highly biased towards non-US entities and small and medium-sized institutions, which is precisely USYC's core customer base.
IV. Reversal of Fund Flow
The simplest and most reasonable explanation for this reversal is that the flow of funds has shifted.
Over the past 30 days, USYC has grown by 11%, while BUIDL has shrunk by 2.85%. This is not due to differences in marketing, but rather a direct result of net inflows of funds into one product and net outflows from another.
This reversal of fortunes was not a gradual shift in the market, but rather the result of a specific event or capital allocation decision. USYC's integration with Binance, its adoption of a yield-accumulating structure, and its lower entry barriers all significantly reduced the friction costs of capital participation; meanwhile, BUIDL failed to build comparable issuance and circulation momentum during the same period.
The current market size of tokenized US Treasury bonds is $10 billion, which is still a small percentage compared to the $310 billion stablecoin market, but its role is changing from a niche experiment to a default option in practice.
The International Organization of Securities Commissions (IOSCO) recently pointed out in its guidance that tokenized money market funds are increasingly becoming stablecoin reserve assets and collateral for crypto-related transactions—which is the core logic driving the growth of USYC.
JPMorgan Chase defines tokenized money market funds as the next high ground after stablecoins, with their core competitiveness focusing on the cross-chain liquidity of assets and the efficiency of collateral utilization.
JPMorgan Chase's analysis positions tokenized US Treasuries as an iteration of stablecoins, rather than an alternative : these assets are programmable cash equivalents with faster settlement speeds, more convenient cross-chain transfers, and lower operating costs when integrated into the collateral system compared to traditional custody models.
Their research report clearly states that once money market funds are tokenized on the blockchain, market participants are expected to gain greater utility and efficiency, including:
- Streamlined payment processes : When tokenized assets are on the same ledger as on-chain currencies such as deposit tokens, stablecoins, and blockchain deposit accounts, investors can benefit from faster delivery versus payment (DvP) settlement cycles. Particularly for tokenized money market funds, securities and cash can be transferred simultaneously, shortening the trading and settlement process by approximately 60-90 minutes, thereby accelerating transaction turnover, significantly reducing liquidity requirements, increasing transparency, and lowering transaction costs.
- Decentralized Finance (DeFi) Integration : Tokenization enables money market funds to implement lending, trading, and collective asset management functions within smart contract protocols, supporting complex multi-party interactions.
- Programmability : Tokenized money market funds promise to further automate manual processes, enabling more complex logical operations and reducing errors. For example, tokenized money market funds can be designed to automatically distribute dividends to investors based on fund-specific interest rate data. This increased programmability reduces manual processing, intermediaries, and operational errors.
- Transactions and Settlements : Blockchain can serve as both a unified record of ownership and a venue for financial activities, enabling investors in tokenized money market funds to enjoy near-instant settlement services with complete transparency among all parties, thereby reducing delays and reconciliation work between intermediaries.
- Collateral Applications : Subject to eligibility requirements and the recipient's willingness to accept, tokenized money market funds can be used as collateral in both traditional and digital asset markets. Furthermore, enabling real-time, automated transfer of collateral enhances intraday liquidity.
With stablecoin yields near zero, tokenized US Treasury bonds offer the market a risk-free on-chain yield that users can access without leaving the crypto ecosystem. Institutions no longer need to leave funds idle in non-yielding stablecoins or transfer funds off-chain to earn returns; they can now hold on-chain yield-generating collateral that combines cash liquidity with the compounding growth potential of government bonds.
V. What will the future trend be?
The $10 billion milestone itself is far less important than the market penetration rate it reflects.
Currently, tokenized US Treasury bonds account for approximately 3% to 4% of the total stablecoin circulation. Considering current fund flow trends and the progress of collateral integration, if this penetration rate doubles in the next 12 months (this is a conservative assumption), the size of tokenized US Treasury bonds could reach $20 billion to $25 billion.
If the flywheel effect of collateral accelerates further, and more trading platforms replicate Binance-style over-the-counter trading channels, this scale could even exceed $40 billion to $60 billion.
The truly valuable core indicators are quantifiable:
- Net issuance trend
- Official announcements regarding the integration of collateral.
- Adjustments to entry requirements, and
- A shift in market preference for revenue processing models.
The growth momentum of USYC within 30 days and the shrinking scale of BUIDL are the first early signs; the pace of USYC's integration with Binance is the second sign; and the significant difference between the two in terms of customer access is the third sign.
USYC's ability to surpass BUIDL is not due to Circle's greater marketing investment than BlackRock's, but rather because its issuance channels, product mechanisms, and access rules perfectly align with institutions' actual needs for on-chain collateral.
The tokenized US Treasury bond market has surpassed $10 billion in size, and its dominance is not due to a single benchmark product, but rather to multiple products entering the infrastructure-level competition phase .
- A competition to see who can integrate faster.
- Who can reduce transaction friction even more?
- Who can reach the target customer group more broadly?
Brand awareness opens the door to the market for the track, but the design and optimization of the collateral transaction process is the key to keeping that door open.
The industry is rapidly evolving, with financial institutions, regulators, and technology providers collaborating to address key challenges such as privacy, identity verification, infrastructure, and compliance. As regulatory frameworks mature and digital identity solutions become more sophisticated, the adoption of tokenized money market funds is expected to accelerate, creating new opportunities for innovation and growth.
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