BlackRock's BUIDL Emerges as Crypto's Largest Tokenized Treasury

BlackRock's BUIDL has emerged as the largest tokenized money market fund, surpassing Franklin Templeton's BENJI. With a market cap of $375 million, BUIDL has grown significantly in six weeks, while BENJI has experienced a modest increase. However, demand for tokenized products remains low due to limited liquidity, creating a "chicken and egg" problem. Despite this, the potential for tokenized government bonds is substantial, with market dominance expected to reach 10% in the future.

BlackRock's BUIDL Emerges as the Largest Tokenized Treasury

In a significant development, BlackRock's USD Institutional Digital Liquidity Fund (BUIDL) has surpassed Franklin Templeton's product to become the largest tokenized treasury on the blockchain.

According to data from Dune Analytics, the six-week-old BUIDL has a market capitalization of $375 million, eclipsing the 12-month-old Franklin OnChain U.S. Government Money Fund (BENJI), which stands at $368 million.

The surge in BUIDL's market capitalization has been fueled by a $70 million inflow over the past week, including a $50 million investment in Ondo Finance's tokenized real-world asset (RWA) OUSG token.

In contrast, BENJI's assets under management (AUM) have declined by 3.7% during the same period.

However, despite the growth of BUIDL and BENJI, demand for such tokenized products remains subdued, according to research strategist Tom Wan of 21.co. Wan cites "thin liquidity" as a key factor in the low interest.

This presents a "chicken-and-egg problem," as issuers struggle to see the clear benefits of tokenizing assets on-chain with low demand, Wan said in an April 30 Twitter thread.

The silver lining is that there is an existing demand for tokenized US Treasuries among players in the $140 billion stablecoin market. As demand grows, "it will be easier to find end investors for swapped tokens," Wan explained.

Tokenized government securities currently account for 1.4% of total on-chain tokenized assets – up from 0.1% at the start of 2023. However, Wan anticipates this market share to increase to 10% in the future.

The Boston Consulting Group estimates that blockchain-based tokenization could represent a $16 trillion market by 2030. It remains to be seen whether BUIDL and other tokenized treasury products will continue to gain traction and contribute to the expansion of this nascent market.