The digital transformation of finance continues to advance, with tokenized assets like securities and U.S. Treasuries representing the next wave of innovation. While cryptocurrencies and stablecoins pioneered early exploration, tokenized money market funds (MMFs) are now gaining significant traction among traditional financial institutions due to their alignment with conventional financial logic. Tokenized MMFs offer investors digital access to familiar products while unlocking new advantages, including enhanced settlement flexibility, portability, collateral efficiency, and the potential for greater financial stability through faster and more transparent redemption processes. **A $10 Billion Milestone and a Leadership Shift** By late January, the total market for tokenized U.S. Treasuries approached $10 billion, marking its transition from proof-of-concept to operational infrastructure. A pivotal development within this growth is Circle’s USYC slightly surpassing BlackRock’s BUIDL to become the largest tokenized Treasury product by assets under management (AUM). As of January 22, USYC’s AUM reached $1.69 billion, compared to BUIDL’s $1.684 billion—a narrow margin of approximately $6.14 million (0.36%). This shift indicates that in determining the success of on-chain cash equivalents, the importance of distribution channels and collateral mechanics now outweighs brand recognition. Over the past 30 days, USYC’s AUM grew by 11%, while BUIDL’s shrank by 2.85%, reflecting sustained net inflows versus outflows rather than a mere marketing victory. **Distribution and Collateral Integration Trump Brand Power** USYC’s key structural advantage lies in its distribution capability via exchange collateral channels. Binance announced on July 24 that institutional clients could hold USYC as over-the-counter (OTC) collateral for derivatives, with near-real-time redemption to USDC. Binance integrated BUIDL into its OTC collateral list four months later, on November 14. This timing was crucial. The product that integrates first into prime brokerage and derivatives trading workflows captures the capital flow. USYC is deeply embedded into the operational layer for automated collateral management. Following Circle’s acquisition of Hashnote in January 2025, USYC was positioned as yield-bearing collateral that leverages the existing USDC ecosystem, allowing institutions already using Circle’s infrastructure for stablecoin flows to onboard USYC seamlessly. While BlackRock’s BUIDL entered the crypto market with strong brand recognition, it has not achieved the same “plug-and-play” integration into native crypto collateral systems. This highlights a critical question for the sector: what constitutes a sustainable competitive advantage when major traditional players enter the space? **Product Mechanics Tailored for Trading and Collateral** Platforms like RWA.xyz highlight a fundamental, mechanical distinction between the two products: USYC is an “accumulating” fund where interest compounds directly into the token’s balance, while BUIDL is a “distributing” fund that pays out earnings separately. Collateral systems, especially automated margin and derivatives infrastructure, prefer the “set-and-forget” balance model of accumulating structures for smoother integration and lower operational friction. Furthermore, the products have substantially different access rules. BUIDL is available only to U.S. accredited investors with a minimum investment of 5 million USDC. USYC targets non-U.S. investors with a much lower minimum of 100,000 USDC. This structural difference in target demographics is significant, as the market for on-chain collateral is heavily skewed towards non-U.S. entities and smaller institutions—precisely USYC’s core audience. **Reversal Driven by Capital Flows** The simplest explanation for this reversal is also the most accurate: capital flows have shifted. USYC’s integration with Binance, its accumulating structure, and its lower access barriers collectively reduced friction for participation. Concurrently, BUIDL did not generate comparable distribution momentum. The $10 billion tokenized Treasury market remains a small fraction (3-4%) of the $310 billion stablecoin market. However, its role is evolving from a niche experiment toward a practical default option. The International Organization of Securities Commissions (IOSCO) has noted that tokenized MMFs are increasingly used as stablecoin reserve assets and collateral for crypto-related transactions—the core logic driving USYC’s growth. J.P. Morgan identifies tokenized MMFs as the next strategic frontier after stablecoins, with competitiveness hinging on cross-chain interoperability and collateral utility. The bank positions tokenized Treasuries as an evolution of stablecoins—programmable cash equivalents offering faster settlement, easier cross-chain transfer, and lower operational costs for collateral integration compared to traditional custody models. In an environment where stablecoin yields are near zero, tokenized Treasuries provide on-chain risk-free yield without requiring users to exit the crypto ecosystem. Institutions no longer need to hold idle, non-yielding stablecoins or move funds off-chain to earn interest; they can now hold yield-bearing collateral on-chain that combines cash-like liquidity with compound growth. **Future Trajectory and Key Metrics** The $10 billion milestone is less significant than the market penetration it represents. If the current penetration rate of tokenized Treasuries relative to stablecoins doubles over the next 12 months—a conservative assumption—the market could reach $20-$25 billion. Should the “flywheel effect” of collateral integration accelerate and more trading platforms replicate Binance’s OTC channel model, the scale could potentially expand to $40-$60 billion. The most telling indicators are quantifiable: net issuance trends, announcements of new collateral integrations, adjustments to access thresholds, and market preference shifts regarding yield distribution mechanics. USYC surpassing BUIDL is not a story of Circle out-marketing BlackRock. It is a story of how USYC’s distribution channels, product mechanics, and access rules better align with the practical usage demands of institutions for on-chain collateral. The race past $10 billion is not driven by a single dominant product but by multiple entrants competing at the infrastructure level—on speed of integration, reduction of transactional friction, and breadth of reach to target users. Brand recognition opened the market’s door, but the optimized design of collateral transaction flows is what keeps it open. The industry is developing rapidly, with financial institutions, regulators, and technology providers collaborating to address key challenges like privacy, identity verification, infrastructure, and compliance. As regulatory frameworks mature and digital identity solutions improve, the adoption of tokenized money market funds is expected to accelerate, creating new opportunities for innovation and growth.