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U.S. Treasury Bills Lead 1,000% Surge in Tokenized Asset Markets

The global trend of tokenization is growing rapidly, with U.S. Treasury bills leading the charge, marking significant growth and investment opportunities.


The global trend of tokenization is growing rapidly, with U.S. Treasury bills leading the charge, marking significant growth and investment opportunities.
Credit: Foretoken Media 2024

Blockchain technology has accelerated the global trend of tokenization, driven by the growing demand for tokenized assets. According to a recent report by Coinbase, high interest rates have significantly increased the demand for safe, high-yielding Treasury bills on-chain in the U.S.


Tokenized Assets Market Value Surpasses $3 Billion


Coinbase reported that the market value of non-stablecoin tokenized assets has surpassed $3 billion, marking a growth of over 100% compared to 2023. This total primarily includes publicly trackable assets. Furthermore, the Hong Kong Monetary Authority estimates an additional $3.9 billion in tokenized bonds, highlighting the global expansion and demand for tokenized assets.


Delving deeper, Coinbase observed that government securities are leading this trend. “Before tokenized Treasury bills, interest focused on commodities,” the report stated. Although the tokenized value of commodities “has been overshadowed by surging government securities, more users on-chain have held commodity-based tokenized assets than any other tokenized asset type [beyond stablecoins].”


Government Securities Lead Tokenization Trend


Top financial firms in the U.S. have driven the development of government securities to take advantage of the surge in demand. For example, in 2019, Franklin Templeton launched its U.S. Treasury money market fund, FOBXX. It was designed to give investors access to government money markets through blockchain.


Franklin Templeton improved investor access to blockchain-based offerings through this infrastructure, making issuing and trading ownership on public blockchains easier. The financial firm initially deployed FOBXX on the Stellar blockchain and later expanded to the Polygon network. FOBXX surpassed $270 million in assets under management (AUM) as of March 31, 2021. However, as of March 31, 2024, the Fund held over $360 million in AUM.


The Rise of Tokenized Loans


Another aspect of the tokenized asset class that has seen a positive push is the tokenized loan market. Tokenized loans refer to converting traditional loans into digital tokens that can be traded on blockchain platforms. This allows for the creation of a new asset class, enabling lenders and borrowers to access a broader range of financial instruments and services.


The market has remarkably increased, from nearly zero in October 2020 to over $400 million by April 2024. This market now includes a variety of loan types, such as trade financing, revenue-based financing, and real estate financing. This suggests that tokenized lending is expanding to include more borrowers and purposes.


Tokenization Broadens Investment Opportunities


In general, tokenization is fundamentally changing the landscape of investment opportunities by broadening the range of asset classes accessible to global investors. Traditionally, investments were largely confined to tangible assets like gold and silver. However, with tokenization, investors can now access assets such as blockchain-based treasuries designed to operate on decentralized platforms.


This innovation extends beyond mere asset class diversification; it also facilitates new business models that transcend traditional market constraints. Unlike traditional markets, which have barriers like geographical distance and high capital requirements, tokenization enables more inclusive and accessible investment opportunities.


Future of Tokenized U.S. Treasury Products


This surge has led to the value of tokenized U.S. Treasury products rising by over 1,000%, reaching $1.29 billion from January 2023 to May 31, 2024. Asset tokenization involves translating the ownership of an asset into a digital token, which can be stored, traded, and exchanged on a blockchain platform. These tokens signify a stake in the original asset. The token is a derivative of an asset and draws its originality from that asset.


According to the report, the market for tokenized assets is predicted to soar to $16 trillion by 2030, equaling the present GDP of the European Union. Stablecoins primarily fuel this explosive growth, though tokenizing tangible assets is also accelerating.


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