Tokenized Treasuries vs Stablecoins: Choosing How to Hold Dollars On-Chain

A fiat stablecoin (USDC, USDT, and roughly 119 others totaling about $300 billion, with USDT and USDC around 88% of it) is a token pegged 1:1 to a currency and redeemable from the issuer. It is the on-chain equivalent of cash: permissionless, freely transferable, and the default unit of account across exchanges, DeFi, and stablecoin payment rails. If the job is to move or settle value, this is the instrument.

The defining limit is yield: a regulated payment stablecoin cannot pay its holders interest. The US GENIUS Act and EU MiCA both prohibit it, so the issuer keeps the yield on the reserves and the holder gets none. That is fine for money in motion and a poor deal for money at rest, which is the gap the other two categories fill.

A tokenized treasury or money-market fund is a tokenized share of a fund, or a note, that holds short-dated US Treasuries and passes the yield through. As of mid-2026 the category was about $16 billion. On 18 October 2026 it was led by Circle's USYC ($2.39B, a Cayman fund for non-US persons), which overtook BlackRock's BUIDL ($2.17B, a BVI private fund offered under Reg D) in March 2026; Ondo's USDY ($2.36B) is a tokenized note rather than a fund. Franklin Templeton's two largest token funds are iBENJI ($1.71B), a private institutional fund with a $5 million minimum, and BENJI, the token of its registered money market fund FOBXX ($0.68B on-chain). Yields track Treasury bills, near 3.3 to 3.7% in mid-2026, down from about 5% in 2024.

The catch is that these are securities, not payment tokens. Holding one means passing KYC and sitting on the issuer's whitelist, and eligibility is scoped by wrapper: accredited or qualified purchasers for the US funds, non-US persons for USYC and USDY. Transfers are limited to approved wallets and redemption runs on the fund's schedule and banking hours, so you do not get the free, instant movement of a stablecoin. The wrapper is the fine print: a Reg D private fund (BUIDL), a registered '40 Act MMF (BENJI, WTGXX), a Cayman Reg S fund (USYC), and a note (USDY) all carry different investor, disclosure, and redemption rules. This is the instrument for earning on dollars you are parking, not spending.

A third category markets itself as yield-bearing stablecoins but is legally neither a payment stablecoin nor a registered fund. Sky's sUSDS (~$5B) pays a governance-set Sky Savings Rate near 3.75%, funded from the protocol's collateral and real-world assets, and behaves like a steady savings rate. Ethena's sUSDe (the staked portion of about $5.5B in USDe) earns a variable, funding-rate-driven yield, near 4% in mid-2026 but historically ranging from about 4% to over 20%.

The yield here is a funding-rate trade, so it is also the risk: sUSDe's return depends on perpetual-futures funding staying positive, and when funding compresses or flips it falls toward zero or negative, with collateral and de-peg risk that a Treasury fund does not have. These are DeFi instruments, permissionless and composable, but calling them stablecoins hides that you are holding a market position rather than a bank-like dollar. They belong in the comparison because product teams reach for them as an earn option, and they should be chosen with the risk understood. For the peg-design view of this category, see our stablecoin models guide.