What Are Tokenized Treasury Bills? Best Guide To Blockchain-Based T-Bills

In 2023, U.S. Treasury bills hit an all-time high in demand, driven by investors seeking safe havens amidst global economic uncertainty. With over $7 trillion in marketable securities outstanding, Treasury bills (T-bills) are considered one of the most secure and liquid investments worldwide.

Yet, T-bills traditional instruments remain locked in legacy financial systems, accessible mainly to institutional investors and high-net-worth individuals.

Enter tokenized Treasury bills.

Tokenized T-bills a groundbreaking innovation merging the reliability of government debt with the accessibility and efficiency of blockchain technology. By turning these time-tested instruments into digital tokens, tokenized T-bills are allowing retail investors to tap into a multi-trillion dollar market at fractional costs.

What is tokenization? Read here.

According to a McKinsey report, the market for tokenized financial assets is projected to reach $4 trillion by 2030, with tokenized bonds accounting for approximately $1 trillion.

But how do T-bills work? And what makes them a compelling choice in a volatile financial ecosystem?

What Are Treasury Bills?

A Treasury bill, or T-bill, is a U.S. government fixed-income short-term debt security issued and backed by the U.S. Department of the Treasury. These securities do not pay periodic interest but are sold at a discount to their face value, with the interest rate effectively determined by the difference between the purchase price and the amount received at the maturity date.

There is a wide range of maturity periods, allowing investors to choose from a minimum duration of four weeks up to a maximum duration of 52 weeks or one year. The interest rate for these short-term Treasury-based instruments is typically aligned with market demand during auctions, offering a competitive yield relative to their risk-free status.

There are five characteristics of T-bills that makes them a appealing investment option:

1. Short-Term Maturity: T-bills typically have maturities ranging from a few days to one year. Common durations are 4 weeks, 8 weeks, 13 weeks, 26 weeks, and 52 weeks.
2. Zero-Coupon Bond: T-bills are sold at a discount to their face value (par value). Investors earn the difference between the purchase price and the face value as their return. For instance, if you buy a T-bill for $980 and it matures at $1,000, your earnings are $20.
3. No Interest Payments: Unlike traditional bonds, T-bills do not pay periodic interest. The return is realized at maturity when the full face value is repaid.
4. Highly Liquidity: T-bills are easily tradable in the secondary market, making them a popular choice for investors seeking quick access to funds.
5. Safe Investment: Backed by the government, T-bills carry minimal credit risk, making them an attractive option during economic uncertainty.

Treasury bills are sold to investors in multiples of $100, up to a maximum limit of $10 million. These securities can be purchased through the official TreasuryDirect platform, banks, authorized brokers, or other financial institutions.

As debt instruments backed by the U.S. government, T-bills carry a "risk-free" tag if held until maturity, further supported by their predictable interest rate and reliability. This safe investment tag helps widespread participation, making T-bills a preferred choice for conservative investors seeking both security and liquidity.

Although the interest income from T-bills is taxable at the federal level, investors benefit from exemptions from state and local income taxes. The interest rates for maturities of 4, 8, 13, 17, and 26 weeks are determined during weekly auctions, while the 52-week maturity is auctioned only once every four weeks.

What are Tokenized U.S. Treasury Bills?

Tokenized U.S. Treasury Bills (T-bills) are digital representations of traditional U.S. Treasury bills that exist and operate on blockchain networks. These tokens are backed 1:1 by real Treasury bills and aim to combine the stability of a time-tested government-issued asset with the transparency, accessibility, and programmability of blockchain technology.

In simpler words, tokenized Treasury bills allow investors to buy security tokens, which represent the U.S. government's short-term debt instruments in digital form.

Tokenized Treasuries are growing in popularity and adoption. The total value of these assets rose from around $100 million in January 2023 and to over $3.85 billion by January 2025, marking a massive 2200% growth within two years.

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Ethereum is the most widely used blockchain for issuing tokenized treasuries, accounting for more than 70% of the tokenized T-bill market cap at nearly $2.8 billion (as of January 2025). Stellar and Solana are second and third with over $281 million and $135 million, respectively.

The increase in demand for tokenized Treasury bills has paved the way for many projects to bring traditional investment instruments into the blockchain space. Ripple's $10 million investment plan on tokenized U.S T-bills on the XRP Ledger highlights this growing trend, collaborating with OpenEden, a Singapore-based RWA token investment platform. 

Imagine combining the stability of the U.S. Treasury bills with the speed and flexibility of crypto assets. That's what tokenized T-Bills offer investors who are adopting this innovative blend of traditional finance and blockchain technology. Investors get 24/7 liquidity, fractional ownership, and cross-border accessibility.

Considering the massive potential of the tokenized U.S. Treasury investment revolution, traditional financial giants are already racing to dominate the digital asset market. BUIDL, the security token launched by investment powerhouse BlackRock and backed by U.S. T-bills, surpassed a $500 million valuation in July 2024.

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Along with the growth of BUIDL, other similar tokens also surged during this period, indicating the growing demand for tokenized U.S. Treasury-backed assets. For instance, the tokenized value of USYC surged by an impressive 700.51%, growing from $42.72 million to $341.98 million, while USDY experienced a significant rise of 280.64%, climbing from $95.30 million to $362.75 million.

How Do Tokenized Treasury Bills Work?

Tokenizing Treasury bills (T-bills) is transforming how traditional assets can be accessed and traded. Here's a breakdown of how the process works and what makes it a game-changer for investors.

Legal Framework And Compliance

The first step in tokenizing T-bills is ensuring that the entire process follows both regional and international financial regulations.

This critical step requires establishing a legal framework that recognizes digital security tokens as valid representations of government debt, ensuring that tokenized T-bills are legitimate investments and comply with the necessary laws. 

The framework ensures that tokenized Treasury bills can be legally traded, settled, and redeemed, providing investors with confidence and regulatory clarity.

Digital Representation Of Assets

The T-bill selected for tokenization is digitally represented on a blockchain or multiple blockchains, creating a one-to-one backing between each token and the underlying U.S. Treasury bill.

This token pegging mechanism guarantees that the tokenized version retains the same value and authenticity as the underlying T-bill, providing trust and security to investors.

Smart Contracts for Automation

Smart contracts are then programmed to automatically execute the terms and conditions of the T-bills, including maturity dates, interest rates, and the redemption process.

By embedding these rules directly into the blockchain, the entire lifecycle of the issued tokenized T-bill, from issuance to maturity, becomes fully automated, reducing administrative burdens and minimizing the risk of errors.

Issuance And Trading On Blockchain

Once tokenized, T-bills are issued on a blockchain platform, where they can be easily traded like any other asset in traditional financial markets. These platforms allow investors to buy Treasury bills with ease, offering global accessibility and enhanced liquidity, unlike traditional methods, where access may be limited or slow.

The resemblance with platforms like the stock market also helps traditional investors to trade tokenized T-bill seamlessly, making the transition to blockchain-based assets feel familiar and simple.

Seamless Settlement And Redemption

Blockchain platforms that facilitate tokenized T-bills, coupled with smart contracts, ensure that trades settle quickly and efficiently. Upon maturity, tokenized T-bills are redeemed automatically, with investors receiving the face value either in digital currency or fiat, as outlined in the terms of the smart contract.

This streamlined process significantly enhances the efficiency and transparency of handling U.S. Treasury bills in a digital world, reducing the need for intermediaries and minimizing delays.

Benefits of Tokenized T-Bills Investing

Reliable Short Term Debt Instruments

Unlike Treasury bonds with higher maturity dates, tokenized T-bills offer the same stability in the face of rising interest rates as traditional U.S. Treasury bills.

This stable nature makes them a highly reliable short-term investment, ensuring low risk and providing peace of mind to investors looking for safe, government-backed assets, even in volatile market conditions.

24/7 Global Accessibility

Tokenized T-bills can be traded on supported blockchain platforms 24/7, offering digital investors the flexibility to buy and sell security tokens from anywhere in the world using a supported bank account.

This continuous accessibility eliminates the limitations of traditional financial markets, allowing global security trading without the limitations of fixed market hours or geographic boundaries.

Lower Fees

Tokenized T-bill eliminates the requirement of traditional custodians or brokers who end up charging hefty fees for their services.

Many investors can now use the tokenized investment to pay lower fees, making the investment process more cost-effective, particularly for large transactions.

Predictable Interest Rate

The interest rate on tokenized T-bills is fixed, allowing investors to know what return to expect upon their investment's maturity without worrying much about the interest rate risk.

This predictability makes them an attractive option for those looking for a secure investment with consistent, low-risk returns, especially in a fluctuating interest rate environment.

High Liquidity

Global accessibility and never-closing markets add more investor and trader participation, helping to improve the security token's liquidity to a higher level.

Leveraging this high liquidity, investors can convert their holdings into cash or trade them in a fraction of the time compared to traditional methods, providing greater flexibility and accessibility.

Improved Transparency and Security

The presence of immutable ledgers helps projects offer enhanced transparency for U.S. Treasury market-based operations like interest rates rise, inducing trust and confidence among the investor base.

Blockchain's security benefits also help foster greater protection against fraud and unauthorized access, ensuring that transactions are secure and reliable.

Notable Players in Tokenized T-bills Space

The popularity of the tokenized T-bill space has been growing in the personal finance space since the beginning of 2023, thanks to the top financial institutions and their participation.

Here is a non-exhaustive list of top contributors.

BlackRock USD Institutional Digital Liquidity Fund (BUIDL)

Partnered with Securitize, BlackRock's BUIDL was launched on March 20, 2024, with tokenized T-bills already valued at around $40 million on its debut day.

Within seven months, BUIDL experienced explosive growth, surpassing its competitors, including Franklin Templeton, with an impressive valuation increase of approximately 1,300%.

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BUIDL security token holders earn a 4.50% APY while charging a management fee ranging between 0.20 and 0.50%. Almost 75% of the BUIDL tokens are hosted on the Ethereum network, while Polygon, Aptos, Avalanche, and Optimism contribute about 25%.

Ondo U.S. Dollar Yield (USDY)

Launched on July 10, 2023, Ondo U.S. Dollar Yield (USDY) is the world's first permissionless yield-bearing token backed by U.S.

Treasuries and is available on Ethereum, Solana, Sui, and many other networks. Starting from October 2023, USDY grew massively from its market cap around $145,000 to over $365 million in a year, representing a growth of over 251,600%.

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USDY offers an annual interest rate of 4.90% with zero management/performance fees for its token holders. Tokens on Ethereum constitute 65% of the total market cap, with Solana around 27% and the remaining 8% spread across other supported networks like Noble, Mantle, and others.

Franklin OnChain U.S. Government Money Fund (FOBXX)

FOBXX invests at least 99.5% in minimal credit risk securities that are fully collateralized by government securities or cash.

This fund, which was launched on April 6, 2021, crossed its $400 million market cap in March 2024, a 51% growth from its previous year's valuation of around $265 million.

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The token holders of this fund earn 4.55% and pay a management fee of 0.15%. Unlike other popular funds, 94% of the market cap of Franklin OnChain U.S. Government Money Fund (FOBXX) is on Stellar, and the remaining is distributed across Arbitrum and Polygon.

Conclusion

By merging the stability and security of the U.S. Treasury bills with the efficiency and accessibility of blockchain technology, these digital assets offer a new and potentially transformative way to invest in government debt securities. While the market for tokenized treasury bills is still emerging, the future prospects are bright.

Growing from $100 million to over $4 billion in nearly three years, they show how people invest in and use government-backed debt.

With the involvement of giants like BlackRock, the adoption and innovation in this space is accelerating rapidly, setting new standards for how traditional assets are managed and traded in the new digital age.

As technology evolves and regulatory frameworks mature, we can anticipate wider adoption of tokenized treasury bills and other tokenized assets.