Navigating the Booming Trend of Tokenized T-Bills 

In recent weeks, the tokenization of Treasury bills (T-bills) has become a trending and popular topic, with on-chain data from our friends from RWA.xyz (see the chart below) revealing a total value of approximately $750 million and an average yield of 5.24%. This marks a remarkable 700% increase for the year, sparking market enthusiasm. However, it’s worth noting that the actual aggregate value of tokenized real-world assets, including T-bills, exceeds reported figures due to traditional players withholding on-chain data, indicating a larger market size than apparent.

While it is fascinating to see the surging assets brought on-chain, a fundamental question arises: ‘Why tokenize?’ If the motivation behind tokenizing T-bills is solely market-driven, without added value, it won’t succeed in attracting traditional issuers and investors into the market. Traditional T-bills are already extremely accessible and liquid for US citizens. Individuals outside the US can easily purchase and sell T-bills ETF via fintechs or distributors.

The true value proposition of tokenized T-bills lies in transferability and interoperability, providing holders with unique utilities and automation beyond the scope of traditional forms. This encompasses the capacity for peer-to-peer transfers with eligible counterparts, trading across diverse platforms, utilizing them as collateral for borrowing, and staking to earn additional yields.

To access these advantages, issuers need control to enforce compliance at the token level, requiring sophisticated smart contracts. Basic standards like ERC20 and ERC721 (NFT) are inadequate, as they are inherently permissionless, allowing unrestricted transfers. This limits issuers to conducting KYC only during the onboarding and redeeming process, with intermittent actions going uncontrollable by issuers.

Hence, the issuance of tokenized T-bills must adopt permissioned token standards such as ERC3643. This enables tokens to embed data and compliance rules to ensure compliant automation, transfers, and interactions throughout the entire token lifecycle while enabling issuers to obtain controls.

Having successfully supported clients in tokenizing T-bills and money market funds through the ERC3643 standard, we’re here to assist if you’re contemplating a similar issuance with a turnkey and white-label solution.

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