How Tokenized Treasuries Are Reshaping Institutional Portfolio Strategy

The institutional investment game is changing fast. Tokenized treasuries have grown from a niche experiment to a serious player in institutional yield strategies, with the market exploding to $7.2 billion by mid-2025—that’s a 329% jump from just $1.7 billion a year earlier. The drivers? Platforms like BlackRock’s BUIDL fund ($3 billion in assets) and Ondo Finance’s OUSG ($693 million) are proving that this isn’t just hype—it’s solving real problems in traditional markets.

Why Institutions Are Actually Switching

Here’s the thing: traditional Treasury markets have a friction problem. Settlement takes days, liquidity gets stuck during volatility, and big players gatekeep access. In April 2025, when tariff announcements hit, 10-year Treasury yields spiked 50 basis points, and bid-ask spreads on longer-term bonds literally doubled. The traditional system couldn’t keep up.

Tokenized treasuries flip the script entirely. Real-time settlement and 24/7 liquidity aren’t just buzzwords—they’re operational game-changers. BlackRock’s BUIDL tokenizes Treasury bonds and repo agreements, enabling institutions to rebalance portfolios instantly in response to macro events. Meanwhile, platforms like Tokeny and Securitize are lowering minimums, letting emerging-market institutions and mid-sized funds finally access U.S. Treasury markets at scale.

The Blockchain Advantage

Let’s talk efficiency. Traditional Treasury markets handle roughly $900 billion daily in transactions, but Q2 2025 volatility exposed their fragility. Market depth for 10-year securities crashed to a quarter of normal levels.

Tokenized treasuries sidestep this entirely. Settlement times collapsed from days to minutes. BNY Mellon and Goldman Sachs have already deployed tokenized money market funds that cut operational costs by up to 40%. By July 2025, U.S. Treasury daily trading volumes hit $1,078.3 billion—a 22.2% year-on-year surge.

Smart contracts automate the nitty-gritty: interest payments, compliance checks, collateral swaps. The EU’s MiCA framework and U.S. regulatory clarity (via the SEC’s 2024 roundtable and the Genius Act) have transformed this from risky experimentation into institutional-grade infrastructure. Cross-border liquidity pools now aggregate traditional capital alongside crypto-native players.

Where This Leads

The projected trajectory tells the story: tokenized assets are forecast to scale from $24 billion in 2025 to $18.9 trillion by 2033. U.S. Treasuries will anchor this expansion—they’re secure, globally recognized, and now dramatically more efficient.

For institutions, the implications are concrete:

• Enhanced returns through DeFi collateralization and continuous trading
• Lower costs via instant settlement and automated compliance
• Portfolio flexibility by integrating tokenized treasuries into balanced on-chain strategies

Franklin Templeton and JPMorgan are already piloting tokenized Treasury funds. By 2030, tokenized mutual funds and ETFs are expected to hold $2 trillion in assets, with Treasuries as the core holding.

The shift from pilot programs to mainstream adoption is happening now. For institutional investors, tokenized treasuries aren’t an experiment anymore—they’re becoming essential infrastructure in a low-yield environment.