Tokenized Treasuries: Blackrock's BUIDL and Beyond

Welcome back to Old Man New Money, I'm Ali Davoudi. Last episode, I gave you the hard truth about real estate tokenization. Hasn't worked, most projects failed, and the ones that are still operating are struggling with liquidity and sustainability. Today, we're gonna talk about the complete opposite. The one category of real world asset tokenization that's actually succeeding, tokenized treasures. BlackRock's BUIDL B-U-I-D-L's fund has over $500 million in assets. Franklin Templeton's tokenized money market has been operating for years. Ondo Finance, Maker Docs, and others are building entire businesses around.

This works, and I'm gonna tell you exactly why it works, when real estate tokenization doesn't. What the business model is, who benefits, and where this is headed. Because this isn't just about treasury bonds on a blockchain, this is about rebuilding the plumbing of how capital moves in financial markets, and it's happening right now as we speak. What are tokenized treasuries? Let me start with what we're actually talking about. Tokenized treasuries are digital tokens that represent ownership in US treasury securities or treasury money market funds. Each token is backed one-to-one by actual treasury bonds held by a regulated custodian.

Think of it like this. BlackRock takes $100 million, buys US treasury bonds with it, and then issues 100 million tokens representing ownership of these bonds. The tokens trade on blockchain networks. The underlying treasuries stay in traditional custody. The token holders receive the yield from the treasury bonds, usually distributed monthly or quarterly. They can trade the tokens 24/7. They can use them as collateral and DeFi protocols, and they can redeem them for dollars when they want to exit. Sounds simple, it is simple, and that's partly why it works. Compare this to real estate tokenization.

With real estate, you're tokenizing a physical asset that requires management, maintenance, tenant relations, property taxes, insurance. With treasuries, you're tokenizing a financial instrument that's already completely digital in the traditional finance system. There's no physical property to manage. There's no operational complexity, and that's why it works. Let me give you five reasons tokenized treasuries succeed where real estate tokenization struggles. First, the asset is perfect for tokenization. US treasuries are the most liquid, most standardized, most trusted financial instruments in the world. There's no valuation uncertainty.

There's no property-specific risks. A treasury bond is a treasury bond. The standardization makes tokenization straightforward. Second, there's massive demand. Cryptonatives need yield. They've been earning zero on stablecoins sitting in wallets or earning risky yield in D5 protocols. Tokenized treasuries give them safe government-backed yield without leaving the crypto ecosystem. That's a real value proposition. Third, the regulatory framework already exists. Money market funds are heavily regulated. Franklin, Templeton, and BlackRock aren't inventing new structures.

They're taking existing SEC-registered funds and adding blockchain technology for token issuance and transfer. The regulatory heavy lifting was done decades ago. Fourth, there are clear operational efficiencies, 24/7 trading, instant settlement, programmable compliance, automated distributions. These aren't hypothetical benefits. They're real advantages over traditional treasury investment vehicles for certain use cases. And fifth, the business model is sustainable. Asset managers charge management fees on assets under management. As tokenized treasury funds grow, the revenue grows proportionally.

There's no complex property management, no individual asset operations. It scales beautifully. And these five factors together explain why you see legitimate regulated multi-billion dollar asset managers entering the space while real estate tokenization remains a mostly small, unregulated project. Who are the key players in their approach when they walk you through the major platforms and what makes each one interesting? BlackRock's BUIDL, which we've already discussed, it launched in March of 2024. It's structured as a tokenized money market fund that invests in cash, U.S. treasury bills, and repurchase agreements.

It's available on the Ethereum blockchain. It's aimed at institutional investors and crypto companies and want treasury exposure without off-ramping to traditional banking. The minimum investment is relatively high, but it's backed by BlackRock's institutional infrastructure. It partnered with Securitize for the tokenization technology. It's not a startup experiment. It's the world's largest asset manager bringing treasuries on chain. Franklin Templeton actually started earlier. Their on-chain U.S. government money fund launched in 2021 on Stellar and later expanded to Polygon, the blockchain for Polymarket.

It was one of the first examples of a traditional asset manager embracing tokenization. Smaller in size than BUIDL, but it proved that the concept worked. Ando Finance takes a different approach. They're a crypto-native company that created institutional-grade financial products. Their tokenized treasury products are structured as limited partnerships that invest in short-term treasuries and money market funds. They're focused on making treasuries accessible within the DFI protocols. And Matrix Dock, based in Asia, issues short-term treasury tokens accessible to retail investors with lower minimums.

They're targeting the Asian crypto market that wants safe yield alternatives to stablecoins. OpenEAT and another player focuses on institutional clients and integrates directly with DFI protocols for use as collateral. Each platform has slightly different structure, different minimums, different blockchain networks, but they're all solving the same core problem, getting treasury yield onto the crypto ecosystem efficiently. The use case is the dive demand. While we had someone buy tokenized treasury instead of just buying treasuries through traditional brokerage. Use case one, crypto companies managing treasury.

If you're a crypto exchange, a DFI protocol or a blockchain company, you're sitting on a significant stablecoin reserve. In the past, those reserves are in zero yield or you had to off-ramp to traditional banking to get yields. Tokenized treasuries let you earn safe yields while keeping assets unchanged. This is huge for operational efficiency. This is also huge for transparency. Use case two, collateral and DFI. Many DFI lending protocols accept tokenized treasuries as collateral. You can deposit your tokenized treasuries, borrow against them and deploy that capital elsewhere while still earning that treasury yield.

This is sophisticated treasury management that was not possible before. And use case three, let's look at 24/7 trading and settlement. Traditional treasury funds of cutoff times. If you submitted a redemption request after 4 p.m., you're waiting until the next business day. Tokenized treasuries trade and settle instantly, 24/7. For businesses managing cash flows across time zones, this matters. Another use case, programmable compliance and reporting. Smart contracts can automate distributions and force holding periods and provide transparent reporting. For funds with complex compliance requirements, this reduces operational overhead.

Another use case, access for global investors. Some tokenized treasury products are available to non-US investors who face barriers accessing US treasuries through traditional channels. Tokenization can simplify cross-border access of structure properly. These are theoretical use cases. These are actual reason why tokenized treasury products now have billions. Yeah, that's billions with a B in assets. What are the economics for asset managers? Let me talk about why asset managers are so interested in this space. The fee structure is compelling. Tokenized treasury funds typically charge management fees between 20 to 50 basis points annually.

On 500 million in assets, that's one to two and a half million dollars in annual revenue. The operational costs are lower than traditional funds in some ways, no physical mails, automated compliance, programmable distributions, but you do have blockchain infrastructure costs, custody relationships with crypto-native custodians, and technology development. But the growth potential is massive. There are hundreds of billions of dollars in stable coins circulating in crypto markets. Most are in zero yield. If even 10% of that moves into tokenized treasuries, you're talking about 30 to $40 billion in potential assets.

At 25 basis points, that's 75 to 100 million in annual fees. For a firm like BlackRock, this is strategic positioning. They're not just capturing assets today. They're establishing the infrastructure and relationship to position them for the next decade of on-chain finance. For smaller asset managers, this is a way to access crypto-native capital that they wouldn't reach through traditional distribution channels. And unlike real estate tokenization where each property requires individual work, treasury fund scales, or adding another 100 million in assets doesn't double your operational burden.

The regular story structure that makes this all possible. Here's something critical that most people don't understand. Tokenized treasury products succeed largely because they fit into existing regulatory frameworks. Franklin Templeton's product is a registered investment company under the Investment Company Act of 1940. It's regulated just like any other money market fund. The tokenization is just the distribution mechanisms. BlackRock's BUIDL is structured similarly with additional compliance layers for blockchain-specific risks like wallet security and smart contract risk.

This means investors get the same protections they have with traditional funds. SEC oversight, audited financials, regulated custodians, and clear redemption rights. Compare this to the real estate tokenization where every project was trying to figure out whether there is security, how to handle property law across jurisdictions, how to structure governance. Tokenized treasury has avoided all that complexity by staying within established regulatory frameworks. The SEC has been relatively accommodating here because these products don't introduce new systemic risk. They're just new wrappers around existing, heavily regulated instruments.

The regulatory clarity has been essential for institutional adoption. Here are the risks that nobody talks about. Even though tokenized treasury's work better than real estate tokenization, they're not risk-free. Smart contract risk is real. If there's a bug in the token contract or the redemption mechanism, you could have problems. Most platforms use audited contracts and have insurance, but the risk still exists. Custody risk matters. The treasuries are held by a traditional custodian, but the tokens are on a blockchain. You have counterparty risk with both the custodian and the blockchain infrastructure.

If the platform goes bankrupt, what happens to the underlying treasuries? Most platforms have clear bankruptcy remote structures, but it's worth understanding. Liquidity risk in stress scenarios. These tokens trade on relatively thin markets. In a crisis, you might not be able to exit quickly at fair value. The underlying treasuries are liquid, but it might take time to process redemptions if everyone rushes to exit at once. And regulatory risk still exists. If regulators decide to impose additional requirements on tokenized securities or on crypto more broadly, it could affect those products. We haven't seen this yet, but it's possible.

Blockchain risk includes network congestion, high GASPs and technical issues with the underlying blockchain. If Ethereum is congested in GASP spike, your transaction costs could end into your yield. None of these risks have materialized significantly yet in the tokenized treasury space, but as these products grow, they're worth monitoring. So my personal take on tokenized treasuries. As someone who's been in Bitcoin since 2011, I have a conflicted view on tokenized treasuries. On one hand, I respect the product market fit. Crypto natives went safe field. This delivers safe field. The execution is clean.

The regulatory structure is how the business model works. On the other hand, it feels like you're bringing traditional financial system on chain rather than building something new. We're taking government debt instruments and wrapping them in blockchain technology. It's useful, but it's not revolutionary. And the entire theory of Bitcoin and blockchain was not your keys, not your coin. Self-reliance. I'm much more interested in Bitcoin as a long-term store of value than in earning 4.5% annually in tokenized treasuries. But I recognize that not everyone shares my Bitcoin maximalism.

For businesses managing treasuries, for crypto companies sitting on stable coin reserves, for investors who want yield without off-ramping, tokenized treasuries make sense. They're a bridge product between traditional finance and crypto. But they're not gonna replace the dollar or disrupt central banking or any of the grander claims that some people make. They're a better way to package treasury exposure for crypto-native users. That's valuable. It's just not revolutionary. Where is all this heading in the next five years? Let me give you my predictions for how this space evolves. First, we'll see massive growth.

I expect tokenized treasury products to reach 50 to 100 billion in assets within five years. The total addressable market is huge and adoption is just beginning. Second, more asset managers are gonna enter. If BlackRock and Franklin Templeton are making money here, others will follow. Expect Fidelity, Vanguard, State Street, and others to launch competing products. Third, we'll see product expansion beyond just short-term treasuries. Tokenized longer duration bonds, tokenized corporate debt, tokenized municipal bonds, tokenized mortgages. The infrastructure that works for treasuries could extend to other fixed income instruments.

Fourth, integration with DeFi will deepen. More protocols will accept tokenized treasuries as collaterals. More lending and borrowing markets will build around them. They'll become core infrastructure in on-chain finance. Fifth, regulatory frameworks will become clearer and potentially more standardized globally. Right now, different jurisdictions treat these differently. That will converge over time. And sixth, we might even see central bank digital currencies interact with tokenized treasuries. If the Federal Reserve launches a digital dollar, how does that interact with tokenized treasury markets? That's an open question.

The trajectory is clearly up and to the right. What's the lesson for the other asset classes? The success of tokenized treasuries teaches us important lessons for tokenizing other asset. Lesson one, standardization matters. Treasuries are identical commodities. They make tokenization straightforward. They more standardize an asset, the easier it is to tokenize successfully. Lesson two, clear demand solves liquidity. Crypto natives wanted to yield, tokenized treasuries provided it. If you build something people actually want, liquidity follows. Lesson three, regulatory clarity enables institutional participation.

BlackRock entered because the regulatory framework was clear. Without the clarity, they would have stayed out. Lesson four, the business model needs to be simple and scalable. Asset managers understand how to make money from the fund. Tokenization fits that model perfectly. And lesson five, start with sophisticated investors before going retail. Most tokenized treasury products focused on institutional and qualified investors first. This allowed them to build infrastructure before dealing with retail complexity. These lessons apply directly to the next two episodes on public and private equity tokenization.

So what should you do as an investor? If you're considering investing in tokenized treasuries, here's my guidance. Understand what you're buying. You're not buying treasuries directly. You're buying tokens that represent an interest in a fund or structure that holds those treasuries. Read the offering documents. Understand the legal structure. Compare the fees. Tokenized treasury products charge management fees. Are those fees competitive with traditional treasury funds or money market funds? Sometimes yes, sometimes no. Do the math. Understand the redemption process. How long does it take to redeem?

Are there restrictions on minimum hold period? What are the redemption fees, if any? Ask the platform risk. Who's offering the platform? What's their track record? Are they regulated? What happens if the platform shuts down? Consider your use case. If you're a crypto-native user who wants to yield on stablecoins, tokenized treasuries might make sense. If you're a traditional investor with a brokerage account, traditional treasury funds might be simpler and cheaper. And remember, this is still a treasury yield. You're earning 4% to 5% in a good environment. That's fine for safety and liquidity, but it's not going to generate wealth.

It's cash management tool, not a growth investment. For me personally, I'd rather hold Bitcoin. But for businesses managing operational cash, this is a smart solution. Connecting to the next episodes. Tokenized treasuries work because they're simple, standardized, regulated, and solve a clear problem. They're the best example of successful real-world asset tokenization so far. But they're also the easiest case. Dead instruments with clear cash flows and no operational complexity. In the next episode, we're going to tackle something much more complicated. Tokenizing public equity.

Companies like Galaxy Digital are putting their stock on blockchain. What does this mean? Does it work? What are the challenges? Public equity is messier than that. It has governance considerations, voting rights, regulatory complexity, but if we can make it work, the implications are massive. And then in our final episode in this module, we'll look at private equity tokenization. This might be the holy grail. Private markets are enormous and illiquid. If tokenization can solve that, it could reshape how capital flows to private company. Treasury tokenization showed us the model works for simple assets.

Now we're going to stress test whether it works for more complex ones. My closing thoughts, I started this episode by telling you that tokenized treasuries are the real world asset tokenization category that actually works. Now you know why. Standardized assets, clear demand, existing regulatory framework, sustainable business models and institutional participation. Real estate tokenization tried to run before it could walk. Tokenized treasuries walked first and are now running. The lesson here isn't that the blockchain only works for simple assets.

The lesson is that you need to start with clear value propositions, regulatory compliance and realistic expectations about liquidity and market structure. As an entrepreneur, I always look for product market fit. Tokenized treasuries found it. Real estate tokenization has it yet. This doesn't mean that real estate will never work. It means the treasury's had an easier path to market and better market product fit than given the current infrastructure and regulations. Your job as an investor or entrepreneur is to identify which asset classes have the product market fit today versus which ones are five years away. I'm Ali Davoudi.

This is Old Man New Money. If this episode helps you understand why tokenized treasuries work and you have other friends that are interested in the space, please share it with someone else.