---
title: "Tokenized Treasuries: Mechanics, benefits, and risks"
description: "Tokenized Treasuries are onchain tokens backed by U.S. government debt. Learn how they are issued and redeemed, the main products, and their benefits and risks."
path: "/learn/tokenized-treasuries/"
label: "Treasury"
image: "/cards/learn-tokenized-treasuries.webp"
---

_Tokenized Treasuries are blockchain tokens that represent U.S. government securities, either directly or through shares of a fund that holds them. This guide covers how they are issued, held and redeemed, the main products, their benefits and risks, and how stablecoins settle the cash side of a trade. [See how Tempo supports institutional settlement](/solutions/institutional-settlement/)._

The U.S. Treasury market is the largest government bond market in the world, with more than $30 trillion in outstanding securities according to [SIFMA](https://www.sifma.org/research/statistics/us-treasury-securities-statistics). Tokenized Treasuries are a small but growing slice of it: [RWA.xyz data](https://app.rwa.xyz/treasuries) put their value at about $14.5 billion as of October 2026.

For a corporate treasury team, the appeal is practical. A fund share that lives on a blockchain can be transferred outside banking hours, posted as collateral or exchanged against a stablecoin payment in the same transaction. Each of those uses depends on how the product is structured, who may hold it and how it converts back to bank dollars.

## What are tokenized Treasuries?

Tokenized Treasuries are digital tokens on a blockchain that represent ownership of, or a beneficial interest in, U.S. Treasury bills, notes or bonds.

The issuer or fund keeps the underlying securities with a custodian and records holdings as tokens in investors' wallets. Smart contracts enforce the issuer's rules for who can hold and transfer the tokens, and they can handle issuance, transfers, income distribution and redemption once those rules are met.

### Fund shares vs. direct ownership

Tokenized Treasuries fall into two structures, depending on how closely the token connects to the underlying bonds.

- **Tokenized fund shares.** The investor owns shares of a fund, often a government money market fund, that holds a mix of Treasuries and cash. It works like owning shares of a bond fund, with the share register kept onchain.
- **Directly backed tokens.** Each token is linked to specific Treasury securities that a custodian holds in reserve for token holders.

### Tokenized Treasuries vs. Treasury-backed stablecoins

A Treasury-backed stablecoin is a different asset. [Stablecoins](/learn/what-are-stablecoins/) are tokens designed to hold a fixed value against a currency such as the U.S. dollar. "Treasury-backed" means the issuer holds Treasuries in its reserves, but the holder has no claim on those Treasuries or the interest they pay. MetaMask USD (mUSD), issued by Bridge for MetaMask, is an example: a stablecoin backed by cash and short-term Treasuries rather than a tokenized Treasury product.

## How tokenized Treasuries work

The life cycle of a tokenized Treasury connects traditional securities markets with a blockchain ledger in five steps.

1. **Acquisition.** The issuer or fund buys Treasuries in traditional securities markets.
2. **Custody.** A regulated custodian holds the underlying securities in line with [applicable securities rules](https://www.sec.gov/newsroom/speeches-statements/corp-fin-statement-tokenized-securities-012826-statement-tokenized-securities).
3. **Minting.** After an approved investor sends cash, the issuer creates matching tokens, usually on an allowlist restricted to onboarded investors.
4. **Income.** The underlying securities pay interest. Depending on the product, the fund distributes income as additional tokens or reflects it in a rising token price, on the schedule set in its offering documents.
5. **Redemption.** The investor returns tokens, the issuer burns them, and cash is paid back by bank transfer or in stablecoins within the fund's dealing windows.

Tokenization does not remove offchain work. Custody agreements, fund administration, investor onboarding and legal compliance continue as they would for a conventional fund, and minting and redemption remain permissioned.

## Examples of tokenized Treasury products

Several established asset managers already issue tokenized Treasury products.

- **Ondo Finance.** Ondo offers the [Short-Term U.S. Treasuries Fund (OUSG)](https://ondo.finance/ousg) to qualified investors and [USDY](https://ondo.finance/usdy) to non-U.S. investors. USDY is a dollar token backed by short-term Treasuries and bank deposits that can move across supported blockchains after an initial holding period.
- **BENJI.** Franklin Templeton issues BENJI tokens as shares in its [Franklin OnChain U.S. Government Money Fund](https://digitalassets.franklintempleton.com/benji/) (FOBXX), which is available on several blockchains.

Each product sets its own investor eligibility, minimums, supported networks and redemption terms, so two tokens backed by similar securities can behave very differently in practice.

## Benefits of tokenized Treasuries

The benefits come from holding a familiar asset on a programmable ledger rather than from the asset itself.

- **Transfers outside market hours.** Tokens can move between approved wallets whenever the network is running, within the issuer's transfer rules.
- **Faster onchain settlement.** A token transfer settles in seconds or minutes, compared with the T+1 cycle common for securities.
- **Programmable records.** Smart contracts keep the share register and process distributions, which reduces manual reconciliation.
- **Collateral use.** Some platforms accept tokenized Treasury fund shares as collateral, so a holder can pledge them without first selling.
- **Verifiable holdings.** Token balances and transfers are recorded on a shared ledger that holders and auditors can check.

## Risks and limits of tokenized Treasuries

Tokenized Treasuries carry the risks of the underlying securities plus new technical and legal ones.

- **Smart contract and network risk.** Code errors or network outages can delay transfers or put funds at risk.
- **Thin secondary liquidity.** The market is small compared with traditional Treasuries, so selling a large position onchain at a fair price may be hard, and most exits run through issuer redemption.
- **Issuer and custodian risk.** Holders depend on the issuer, fund administrator and custodian doing their jobs and keeping accurate records.
- **Legal treatment.** Rules for tokenized securities vary by jurisdiction and are still changing, and accounting treatment may differ from a direct Treasury holding.
- **Cash conversion.** Redemptions to bank dollars follow the issuer's dealing cutoffs and banking hours, and [on- and off-ramps](/learn/stablecoin-on-off-ramps/) follow local rules.

## Settling the cash leg with stablecoins

Every purchase or redemption has two legs: delivery of the token and payment of cash. If the cash moves by bank wire, the trade waits on Fedwire hours and cutoffs, and one side carries exposure until both legs complete.

Stablecoins can serve as the cash leg on the same network as the token. In that case the trade can settle as delivery versus payment, where the token and the payment move in one transaction and either both complete or neither does. The guide to [tokenized deposits](/learn/tokenized-deposits/) explains delivery versus payment in more detail. Turning stablecoins back into bank dollars still depends on ramps and banking hours, and the issuer's own rules decide which stablecoins it accepts.

## Where Tempo fits

Tempo is a payments-first Layer 1 network that can carry the stablecoin cash leg for tokenized asset trades, alongside existing custodians and asset managers.

- **Settlement in under a second.** Stablecoin payments settle onchain in under a second, while redemptions to bank accounts follow their own timelines.
- **Fees in stablecoins.** Network fees are paid in stablecoins, so treasury teams do not hold a separate gas token. See [paying fees in any stablecoin](https://docs.tempo.xyz/guide/payments/pay-fees-in-any-stablecoin).
- **Structured payment data.** [Transfer memos](/learn/transfer-memos/) attach references to each payment so finance teams can match settlements to trades in their ERP.
- **Private balances.** [Tempo Zones](/zones/), available to enterprises through early access, keep balances and activity inside a Zone hidden from the public while the operator keeps full visibility.

Asset selection, custody of the tokens, investor eligibility, ramp partners and the legal review of each product remain the customer's responsibility. [Contact the Tempo team](/contact/) to discuss your settlement flows.

## FAQ

### What is the difference between tokenized Treasuries and Treasury-backed stablecoins?

A tokenized Treasury gives the holder a claim on Treasury securities or on shares of a fund that holds them, including the interest those securities pay. A Treasury-backed stablecoin is a dollar token whose issuer holds Treasuries in reserve, and the holder has no claim on those Treasuries or their interest.

### Who can buy tokenized Treasuries?

Most products are open only to investors who pass the issuer's onboarding, which usually includes KYC checks and accredited or qualified investor status. Some products are offered only to non-U.S. persons, so eligibility depends on the product and the investor's jurisdiction.

### Can tokenized Treasuries be traded 24/7?

The tokens can move onchain whenever the network runs and the issuer's transfer rules allow it. Minting, redemption and conversion to bank dollars still follow the issuer's dealing windows and banking hours.

### How is the cash leg of a tokenized Treasury trade settled?

The cash leg settles either by bank wire or in stablecoins. When the token and the stablecoin payment move on the same network, the trade can settle as delivery versus payment, so both legs complete together or not at all.

### What are the main risks of tokenized Treasuries?

The main risks are smart contract or network failures, thin secondary market liquidity, issuer and custodian risk, and legal treatment that varies by jurisdiction. Holders also carry the interest rate risk of the underlying securities.

### Can institutions hold tokenized Treasuries within existing custody and compliance requirements?

In many cases, yes. Most products restrict minting and redemption to verified investors, and institutions can keep the tokens with qualified custodians while applying their usual KYC and AML controls.