The Global Surge in Tokenized Treasuries — Europe Takes the Lead
Europe has been at the forefront of financial innovation with tokenized bonds.
The European Investment Bank (EIB) recently issued a 100 million euro two-year bond. This is the fifth tokenized bond issued on HSBC’s Orion tokenization platform.
But how do these transactions work?
When an investor buys these bonds, the entire transaction is recorded on a public blockchain. Settlement is done using Banque de France’s experimental central bank digital currency (CBDC). This eliminates delays and ensures instant, transparent transactions.
Since 2021, the EIB has been involved in the tokenized bond movement. It has collaborated with the European Central Bank and commercial banks on Ethereum and has also worked with HSBC, Goldman Sachs, and Société Générale.
Why Governments Are Finding Tokenization Valuable?
Governments love tokenization because it keeps traditional finance intact while making it more efficient. Think of tokenization as giving an old car a modern engine — it doesn’t change what the car is but makes it faster, smoother, and more reliable.
Tokenized treasury funds fall at the intersection of traditional finance and blockchain, highlighting their biggest merit. There is no need to upturn established processes or discard them. Tokenization platforms like TokenFi help integrate digitally viable processes into traditional financial product ecosystems.
For instance, a treasury bond or real estate can be represented as a token on a blockchain and can be bought, sold, and traded transparently and securely.
Let’s simplify it with an example.
Sarah, a school teacher in Germany, wants to invest in treasury bonds but doesn’t have thousands of euros. Thanks to tokenization, she buys $100 worth of tokenized bonds through a blockchain platform. These tokens represent her share in a $100 million bond.
Every six months, Sarah’s interest payment is automatically deposited into her digital wallet using smart contracts. If Sarah decides to sell her tokens, she can do so instantly on the blockchain, without waiting for banking hours or approvals.
Based on smart contracts, tokenized treasuries can be programmed and custom-built based on compliance, kinds of treasuries, duration of tenure, and other variables related to a treasury bill. Smart contracts also allow the automatic execution of transactions and disintermediation to a certain extent. By tokenizing treasury bills, countries aim to lower entry barriers and make investments in treasury bonds affordable for retail investors.
Treasury bonds are a kind of credit the government takes from lenders and grants a bond certificate and a fixed yield for a designated period in exchange. When tokenized funds move on-chain, they benefit from blockchain’s distributed and global nature, where everyone can participate.
This without-border infrastructure, aka the blockchain, can help bring immense capital to any economy via these bonds. The treasury market, which was earlier accessible only to accredited investors or institutions, can now be accessed by investors worldwide. .
Europe is into another tokenized fixed-income bond called DIGIT (Digital Gilt Instrument) issued by the treasury. The details are still under wraps, but the step itself is a giant leap for tokenization in the debt markets.
Tokenized Treasuries
U.S. treasuries worth $2.40 billion have already been tokenized, per data from RWA.xyz.
Major financial institutions are actively driving this evolution. For example, BlackRock has launched a tokenized fund, BUIDL, across multiple blockchains. The largest share is on Ethereum, with $443 million, followed by Polygon with $32 million, and smaller amounts on Aptos, Optimism, and Arbitrum. Overall, BUIDL has reached a market capitalization of $536 million.
Many cities in the US have issued municipal bonds on the blockchain. Quincy and Massachusetts issued multiple tokenized municipal bonds.
At the recent Treasury Borrowing Advisory Committee (TBAC) meeting, members discussed the pros and cons of tokenization in the treasury markets. The committee said, “Tokenization could lead both to operational improvements and innovation in the Treasury market.”
The committee also recognizes the “operational, regulatory, and financial stability risks” associated with tokenization. However, all these risks will be manageable as we proceed.
Simplifying Tokenization
At TokenFi, we’re building tools to make tokenization simple and accessible. Our Token Launcher already allows users to create tokens (ERC-20, ERC-721, ERC-1155) on leading blockchains in just minutes, no coding required.
We’re also developing an RWA Tokenization Module to help tokenize real-world assets like real estate, commodities, and even treasury bonds. This module will make it easy for anyone to bring real-world assets onto the blockchain securely and efficiently.
For those who prefer messaging apps, our QuickLaunch Bot enables token creation via Telegram and Discord, ensuring that tokenization is just a few clicks away.
