Tokenized U.S. Treasuries Plunge 10.57% as Investors Flee Amid Regulatory Uncertainty and Rising Rates

The tokenized U.S. treasuries market has experienced a sharp reversal, shedding $800 million in a single week, according to data from rwa.xyz. This represents a 10.57% decline from its peak of $7.55 billion on July 16, 2025, marking the largest weekly outflow since the sector’s explosive growth began in 2024. The drop highlights growing investor caution amid shifting market dynamics and regulatory uncertainties.

BlackRock’s BUIDL fund, the largest in the category, saw the most significant outflow, losing $409 million to fall to $2.41 billion. Franklin Templeton’s BENJI also lost $29.51 million, while the Superstate Short Duration U.S. Government Securities Fund (USTB) bled $310.38 million. These concentrated exits from major players contrast with modest gains in smaller funds like Ondo’s OUSG and USDY, which posted 0.12% and minor increases, respectively. The divergent trends suggest strategic repositioning rather than a broad collapse, though the scale of the outflows signals a cooling of the sector’s earlier momentum.

The selloff follows a period of rapid growth driven by blockchain’s perceived advantages in speed, efficiency, and reduced counterparty risk. However, macroeconomic factors such as central banks’ tightening monetary policies and inflationary pressures have eroded the appeal of tokenized assets. Analysts note that the market, which accounts for less than 0.1% of total U.S. Treasury holdings, remains highly volatile and speculative. Regulatory ambiguity further complicates its trajectory, with the SEC’s lack of a definitive stance on tokenized government securities creating compliance risks for institutional investors.

While the drop does not spell the sector’s demise, it underscores structural challenges in integrating blockchain into traditional financial systems. The absence of standardized settlement protocols and custody arrangements has created friction across platforms, limiting scalability. Proponents argue that tokenized treasuries still hold long-term potential for streamlining cross-border transactions, but the recent turbulence serves as a cautionary reminder of the market’s nascent stage.

The coming weeks will be critical in determining whether this correction is a temporary pause or a sign of deeper structural issues. For now, the $800 million retreat reflects a recalibration of risk in a space that had previously seemed impervious to volatility.

[1] Source: [Tokenized Treasury Frenzy Fizzles With Stunning $800M Weekly Drop] [https://news.bitcoin.com/tokenized-treasury-frenzy-fizzles-with-stunning-800m-weekly-drop/]