Tokenized funds — investment vehicles that represent fund shares as blockchain tokens — have grown from a marginal corner of the digital asset market into one of its fastest-expanding segments. Two years ago, for every $100 parked in stablecoins, just $2.99 sat in tokenized fund products. Today, that figure stands at $11.39 — a nearly fourfold increase that reflects rising on-chain demand for yield.

The shift is unfolding against a backdrop of roughly $300 billion in total stablecoin market value, still overwhelmingly dominated by USDT and USDC. Tokenized real-world assets — the category that includes Treasury-backed funds and money market products — now represent somewhere between 10% and 17% of that stablecoin universe, depending on who is counting.

Leading issuers capture most of the growth

The expansion has not been evenly distributed. A handful of products from heavyweight issuers account for the bulk of the activity:

• Circle, the issuer of USDC, has seen its USYC product accumulate roughly $2.5 billion to $3 billion in value.
• BlackRock's BUIDL fund — the tokenized vehicle launched by the world's largest asset manager, which drew significant attention when it debuted on Ethereum — sits at approximately $2.2 billion to $2.7 billion.
• Ondo, a protocol focused on tokenized real-world assets, has carved out a position with USDY of around $2.1 billion to $2.3 billion.

Total tokenized Treasury and money market fund value now ranges between $15 billion and $33 billion, a wide band that reflects the difficulty of tracking assets spread across multiple chains and wrapped in different structures. During peak growth periods, some of these products have posted monthly increases of 8% to 10% or more.

The economic appeal is structural. Traditional stablecoins such as USDT and USDC function as digital dollars — useful for payments and settlement, but they pay holders nothing. The issuers earn yield on the reserves backing those tokens and keep the profit for themselves. Tokenized funds flip that model by passing short-term Treasury yields through to holders, turning idle on-chain capital into a return-generating asset.

Regulation: both tailwind and ceiling

The emerging regulatory landscape is shaping up to be relatively favorable for tokenized funds, at least compared with stablecoins. The GENIUS Act, US stablecoin legislation expected to take shape in 2025, would explicitly restrict yield payments on payment stablecoins while simultaneously positioning tokenized funds as acceptable reserves.

JPMorgan analysts have estimated that tokenized funds currently make up about 5% of the broader stablecoin ecosystem. Their assessment suggests that without significant legal adjustments — particularly around transferability and cross-platform interoperability — tokenized funds are unlikely to capture more than 10% to 15% of the total stablecoin market.

The transferability problem is real. Most tokenized fund shares cannot move as freely as stablecoins. They are subject to KYC requirements, redemption windows, and compliance layers that make them less liquid than a plain USDT transfer.

Tokenized funds as collateral infrastructure

Beyond yield generation, token funds are finding a second life as infrastructure. Several protocols already use tokenized Treasury products as collateral or as reserves backing other stablecoins — a role Treasury bills and money market instruments have long played in traditional funding markets. Ethena's products, for example, integrated tokenized assets as part of their reserve structure.

For institutional players, this is the kind of composability that makes blockchain infrastructure interesting. BlackRock did not launch BUIDL as a novelty, and JPMorgan did not begin analyzing tokenized fund market share idly. These firms see a future in which on-chain settlement of traditional financial products becomes standard, and they are positioning accordingly.

What to watch from here

The GENIUS Act's final form will matter enormously. If it codifies the yield restriction on payment stablecoins while creating clear compliance pathways for tokenized funds, the analysis suggests capital rotation into the sector could accelerate.

Interest rates present the other key variable. Tokenized Treasury funds are attractive precisely because short-term rates have been elevated. If the Federal Reserve cuts rates aggressively, the yield advantage driving this shift would shrink, and the friction costs of tokenized funds would become harder to justify relative to the simplicity of holding a plain stablecoin.