BlackRock’s leap from a March 2024 pilot to a May 2025 on‑chain money‑market fund now holding US $2.7 billion has proved that tokenized Treasuries belong on the P&L, not merely in the lab. Its latest SEC filing seeks approval for a parallel US $150 billion tokenized Treasury trust—enough capacity to absorb three months of new‑issue T‑bills. Secondary‑market data are decisive: bid‑ask spreads on the ERC‑20 share class average 6 bp on weekdays and remain under 10 bp on weekends, giving market‑makers continuous two‑way risk. Citi’s strategy is narrower but just as material. After last year’s private‑equity PoC on Avalanche’s Spruce subnet, US $380 million in receivables‑finance assets now sit on a permissioned Ethereum instance shared with five multinationals. Clearance time dropped from T+2 to under eight minutes, releasing roughly US $12 million in working capital each quarter—enough to pay for the migration on saved overdraft fees alone. Together the two firms account for 60 percent of the US $6.6 billion tokenized‑Treasury universe and nearly half of its 18 000 unique wallet addresses, giving them decisive influence over emerging data schemas and audit standards.
Ethereum’s Liquidity Gravity
Despite multi‑chain rhetoric, 78 percent of settled notional still lands on Ethereum. The reason is reflexive: the bigger the liquidity pool, the more conservative desks value deterministic finality and battle‑tested tooling over marginal gas savings. Custodian telemetry shows 94 percent of RWA audits reuse open‑source EVM libraries, and average block‑space consumed by regulated RWA tokens has climbed from 2.9 percent to 7.4 percent of main‑net capacity in six months—overtaking DeFi lending protocols for the first time. A CME‑style request‑for‑quote smart contract now clears OTC block trades above US $25 million without leaking order flow, shaving execution slippage by roughly 3 bp relative to dark‑pool equivalents. Competitors such as Avalanche and Polkadot capture provenance‑heavy long‑tail assets—carbon credits, real‑estate notes, trade finance—but the deepest capital stacks remain married to tokenized dollars and Treasuries, where swap‑line fungibility with Fedwire is non‑negotiable. As a result, Ethereum continues to function as the “gravity well” for RWA liquidity much the way eurodollars anchor global FX funding.
Why the Adoption Curve Is Steeper Than ETFs Ever Faced
Total value locked in tokenized Treasuries has risen 11‑fold in 14 months, reaching 0.1 percent of the US $7‑trillion secondary‑Treasury market. That sliver sounds trivial until one recalls that exchange‑traded funds took a decade to cross the same threshold. Three macro–micro tail‑winds make today’s curve steeper:
- Basel III Endgame capital rules favour high‑quality liquid assets, so banks can switch deposits for on‑chain T‑bills without dinging Tier‑1 ratios.
- FedNow daylight‑overdraft pricing rewards intraday netting, which tokenized positions handle automatically.
- Observable on‑chain yield—4.15 percent on average—lets compliance teams reconcile NAV in real time and cut operational‑risk reserves by ~10 bp.
With thirteen custodians now offering straight‑through processing into “fire‑walled” smart‑contract vaults and auditors signing SOC 1 reports on escrow balances, even conservative fiduciaries are inching in. McKinsey’s base‑case forecast of a US $2 trillion tokenized‑cash‑and‑T‑bill market by 2030 already looks soft: one‑percent penetration of global money‑market‑fund assets alone implies US $6 trillion, generating roughly US $9 billion in annual fee income for servicers that can run real‑time NAV and collateral APIs.
Stress‑Points to Watch in 2025–26
- Regulatory composability. A tokenized fund share cannot yet serve as repo collateral in most G‑20 venues, forcing capital‑inefficient work‑arounds. BIS Paper No. 141 hints at a 2026 pilot for cross‑jurisdictional collateral reuse; success would unlock the next leg of leverage‑driven demand.
- Settlement‑risk waterfalls. A BlackRock share token settles at T+0, but fiat redemption still touches an RTGS batch; the gap will close only when wholesale CBDCs exit the sandbox.
- Fee compression. BlackRock’s flagship wrapper charges 14 bp all‑in, versus 18 bp for its off‑chain twin. Citi’s permissioned fork runs at 11 bp by replacing external auditors with continuous attestations. A credible path to sub‑10 bp costs would render omnibus custody economically obsolete for plain‑vanilla high‑grade credit.
Portfolio Implications
Platform selection in 2025 is not about crypto ideology but about capturing network externalities with tolerable compliance risk. BlackRock’s asset‑light issuance—outsourcing Securitize for transfer‑agent duties and Coinbase Custody for safekeeping—shows incumbents can flex outsourced tech without ceding brand equity. Citi’s decision to run its own permissioned Ethereum fork offers an equally viable playbook for scale banks wary of public‑chain exposure. Either way, tokenization is treated less as a bet on coin prices and more as a controlled upgrade to post‑trade plumbing. For portfolio managers the actionable takeaway is straightforward: tokenized Treasuries are now a liquidity pool, not a lab demo. They settle faster, show real‑time yield, and embed programmability that can collateralise intraday FX or cross‑margin derivatives through a single API call. The competitive frontier will be native‑token asset servicing—automated tax‑lot accounting, real‑time securities lending, and composable repo—all of which, if executed on Ethereum’s neutral base layer, would entrench its primacy for another market cycle.
