Key Takeaways
- •Tokenized money-market funds have surged from $770M to nearly $9B in under a year.
- •BIS warns their structure could accelerate liquidity stress during mass redemptions.
- •BlackRock and Franklin Templeton continue to rapidly expand tokenized Treasury products across multiple blockchains.
The speed of the shift has now caught the attention of the Bank for International Settlements (BIS), which says the crypto world may be building its next major source of systemic risk.
Investors have been flocking to tokenized versions of U.S. Treasurys, attracted by reliable yields without leaving the crypto ecosystem. What began as a niche experiment has now ballooned into almost $9 billion in on-chain assets, up from less than $1 billion at the end of last year. For many users, these products represent the first real competitor to stablecoins — offering similar on-chain flexibility, but with interest payments that stablecoins do not provide.
BIS acknowledges that the appeal is obvious: money-market exposure, represented as blockchain tokens, moves instantly between wallets and across networks, opening the door to DeFi lending, collateralized borrowing and automated trading. But the bulletin argues that the structure of this new market also introduces a vulnerability that did not exist before.
A Fast Market on Top of a Slow Market
The report notes that token transfers settle instantly on blockchains, while the securities backing them settle on traditional rails, sometimes over multiple days. If redemption pressure suddenly spikes, token holders could move faster than fund managers can liquidate real assets, creating a scenario where liquidity vanishes on-chain long before it does off-chain.
BIS also points to a growing dependency loop: some money-market funds are now used directly as collateral for leveraged trades, margin loans and stablecoin swaps. A rush to sell tokens in one sector of crypto, it warns, could cascade into other markets at a pace traditional finance is not built to absorb.
The bulletin arrived just one day after the appointment of IMF official Tommaso Mancini-Griffoli as the head of BIS’s Innovation Hub — a move that signals continued focus on tokenization, digital currencies and real-world asset finance.
Asset Managers Are Scaling Anyway
Despite the warning, the largest asset managers are racing further into tokenization. BlackRock has been rapidly extending its USD Institutional Digital Liquidity Fund (BUIDL) across multiple blockchains — now live on Ethereum, Aptos, Arbitrum, Avalanche, Optimism and Polygon. The portfolio is currently the largest tokenized money-market fund on-chain with more than $2.5 billion in assets, according to RWA.xyz.
Franklin Templeton has taken a different strategic route, integrating its Benji tokenized platform with the Canton Network, an ecosystem designed specifically for regulated institutions. The firm’s government money-market fund already accounts for over $844 million in tokenized exposure.
The competition between the two firms — one focused on interoperability across open networks, the other oriented toward institutional systems — reflects two expanding fronts of tokenization.
Where This Leaves the Crypto Market
Whether these instruments become a stabilizing force or a new point of fragility depends on how they behave during the next market shock. If tokenized funds continue to scale into collateral for lending, derivatives and leverage — and BIS believes they will — the next liquidity crunch in crypto may not start with Bitcoin or stablecoins, but with tokenized Treasurys.