The market for tokenized U.S. Treasury and money market products is booming in 2025, growing by an impressive 80% to reach $7.4 billion, according to a new report from analytics firm RWA.xyz.
This rapid growth signals a potential shift in the crypto landscape, as investors and funds look for higher-yield alternatives to traditional stablecoins.
These tokenized products include Treasury funds that issue blockchain-based tokens representing shares in the funds, as well as digital versions of U.S. government bonds. Major players like BlackRock, Franklin Templeton, and Janus Henderson have seen their combined holdings triple, reflecting soaring demand for these new financial instruments.
Why Tokenized Treasuries Are Attracting Investors
The appeal of tokenized Treasuries lies in their yield. Unlike stablecoins which typically don’t pay interest to holders tokenized Treasury products distribute yield directly to investors.
With U.S. interest rates still relatively high due to the Federal Reserve’s efforts to combat inflation, Treasury bond yields have remained attractive. For example, 20-year U.S. Treasuries are currently offering yields of around 4.893%.
That’s enticing compared to stablecoins, which generally just aim to hold their $1 peg without offering returns. As a result, many traders are shifting funds away from stablecoins into tokenized Treasuries as a more lucrative way to park their capital.
A Threat to Stablecoin Issuers
For major stablecoin issuers like Circle and Tether, this trend could spell trouble. These companies generate revenue by holding U.S. Treasuries as collateral for their stablecoins, pocketing the interest income themselves rather than passing it on to stablecoin holders.
If more investors choose tokenized Treasuries over stablecoins, stablecoin issuers could face shrinking revenue streams. They may even be forced to start offering yields to stay competitive a move that could upend the stablecoin business model.
Despite these headwinds, demand for stablecoins hasn’t disappeared. The total supply of stablecoins has continued to grow, climbing from $2.5 billion in January 2025 to $255 billion as of July 2025.
This suggests that while tokenized Treasuries are gaining ground, stablecoins remain deeply embedded in the crypto ecosystem at least for now.
