Government bonds worth over $6 billion have been turned into digital tokens
In the rapidly evolving world of cryptocurrencies, the tokenization of government bonds has emerged as a significant development. With a current market value of over $6 billion, this trend is led by BlackRock's "BUIDL", which holds nearly $2.5 billion in tokenized government bonds.
The US government itself is a key player in this movement, following the ratification of the GENIUS Act in July 2025. This act aims to popularize stablecoin tokens that could represent portions of the US debt, with an intention to tokenize part of the roughly $35 trillion US debt through stablecoins. However, precise amounts tokenized by distinct institutions have not been publicly reported yet.
Other financial institutions are also getting involved, inspired by government moves. Notable players include Circle, which holds $491 million in tokenized government bonds, and Franklin Templeton, with $700 million in its BENJI platform. Ondo and Superstate are also significant players, holding $586 million and $650 million, respectively.
The Bank for International Settlements (BIS) has expressed concerns about the risks generated by cryptocurrencies and decentralized finance (DeFi) spilling over into essential parts of traditional finance (TradFi) and the real economy. The BIS has published a paper focusing on the connection between DeFi and TradFi, particularly in relation to Real World Assets (RWAs). RWAs refer to traditional financial instruments such as bonds, loans, or stocks issued as tokens on a blockchain.
Tokenized government bonds are primarily reserved for verified investors, usually qualified or accredited ones, and the tokens can only be transferred to users on a whitelist. This restriction may slow down or even completely hinder integration into DeFi protocols.
The majority of government bond tokens run on Ethereum, with $4.5 billion of the six billion dollars in US Treasury tokens on Ethereum. However, other platforms, such as Paxos and Tether, also issue tokenized commodities, primarily gold tokens, which are freely tradeable on Uniswap and other exchanges.
Despite its growth, the sum of $6 billion in tokenized government bonds is only a small fraction of the bond markets. Financial institutions deciding to interact with the crypto ecosystem should meticulously assess these risks before making any moves. The BIS, in its paper, emphasizes the need for careful consideration of the potential risks and benefits of integrating DeFi with TradFi and the real economy.
