Research firm Kaiko predicts that tokenized Treasuries will continue to attract investors despite expected US Federal Reserve rate cuts. The firm’s report highlights the increasing interest in these tokenized funds due to their liquidity and security benefits. Kaiko also points out that even if rates are reduced, the real Fed funds rate adjusted for inflation may remain stable, making Treasuries attractive compared to riskier assets.
One of the key findings in the report is the growing activity in the tokenized fund market. BlackRock’s BUIDL fund has become the largest on-chain fund by assets under management since its launch in March, with $520 million in net inflows as of June. Other notable funds offering exposure to traditional debt instruments like US Treasuries include Franklin Templeton’s FOBXX, Ondo Finance’s OUSG and USDY, and Hashnote’s USYC, all providing yields aligned with the Fed funds rate.
Despite the growing interest in tokenized Treasuries, the report highlights potential challenges that these funds may face as the US rate environment continues to evolve. Market hype surrounding these funds may subside, but the appeal of tokenized Treasury funds may persist even with expectations of Fed rate cuts. The report points out that if inflation falls at the same pace or faster than nominal rate cuts, real rates could remain stable or even rise.
The tokenized US Treasuries market has reached a record high of $1.93 billion, growing 150% year-to-date according to rwa.xyz data. After the launch of BlackRock’s BUIDL fund, Ethereum has become the preferred infrastructure for deploying tokenized funds, with $1.4 billion in digital assets created on the network. Stellar, Solana, and Mantle also count among the most used networks for tokenized US Treasuries, with significant amounts deployed on each platform.
Overall, the research firm Kaiko’s report provides valuable insights into the growing interest in tokenized Treasuries and the challenges and opportunities that this market presents. Despite anticipated Fed rate cuts, investors continue to find these tokenized funds attractive for their liquidity and security benefits. With the market reaching new highs and significant activity on various blockchain networks, the future looks bright for tokenized US Treasuries.
