Blockchain-Based Funds: Tokenized Money Market and Index Funds in 2026

Key Takeaways

• Blockchain-based funds are traditional fund structures whose shares are represented as tokens on a public or permissioned blockchain.
• BlackRock BUIDL crossed roughly $2.85 billion in AUM across 8+ networks by 2026, and JPMorgan launched MONY in December 2025 and JLTXX on May 13, 2026.
• The GENIUS Act, enacted July 2025, permits payment stablecoin issuers to hold tokenized money market fund shares as reserve assets.
• Total on-chain tokenized real-world assets (excluding stablecoins) reached approximately $31.4 billion by mid-May 2026, with tokenized U.S. Treasuries accounting for roughly $12.88 billion.
• Public-chain settlement of tokenized fund issuance depends on institutional-grade validator infrastructure across Ethereum, Solana, and Polygon.

Tokenized funds are traditional fund vehicles whose shares exist as on-chain tokens. The two leading categories are tokenized money market funds (BUIDL, BENJI, OUSG, JLTXX) and tokenized index funds. Token holders receive periodic rewards via daily-accruing or rebasing tokens, redeem through allow-listed wallets, and operate inside KYC/AML frames. The segment grew from roughly $1 billion in 2024 to over $31 billion by mid-2026, driven by the GENIUS Act and major asset manager launches.

What Are Blockchain-Based Funds

A blockchain-based fund issues its shares as digital tokens recorded on a distributed ledger rather than only in a transfer agent’s books. The legal wrapper stays the same. The fund is still a registered or exempt vehicle holding portfolio assets, calculating NAV, and paying distributions.

Each token corresponds to one share or a fractional unit, and on-chain transfers between approved wallets update the cap table in real time. Settlement compresses from T+2 to near-instant.

Issuance happens on two kinds of networks:

• Public chains such as Ethereum, Solana, and Polygon, where token contracts are visible to anyone but transfers are gated by allow-listed wallet logic.
• Permissioned chains operated by a bank or consortium (for example, Kinexys, previously Onyx by JPMorgan or Canton Network) where access is restricted at the network level.

Public-chain issuance dominates new launches in 2026 because it lets fund administrators tap a wider distribution channel and lets stablecoin issuers hold the tokens directly as reserves.

Tokenized real-world assets on public blockchains grew from approximately $6 billion in early 2025 to $31.4 billion by mid-May 2026, roughly a 5x expansion in 18 months (sources: RWA.xyz, DefiLlama).

How Tokenized Funds Market Funds Work

A tokenized money market fund (MMF) holds the same underlying portfolio as a conventional government MMF: U.S. Treasury bills, overnight repos, and short-dated agency paper. NAV is targeted at $1.00 per share. Daily reward distributions accrue to token holders.

The mechanical difference sits in how shares are delivered. Subscriptions flow through a transfer agent or a regulated platform such as Securitize or Morgan Money, and the resulting share token is minted to the subscriber’s whitelisted wallet address.

Redemptions reverse the flow. The holder sends tokens to the issuer’s smart contract, the contract burns the supply, and the fund administrator pays out USD or, increasingly, a regulated payment stablecoin on the same business day.

Two distribution patterns dominate:

• Accruing tokens with periodic dividend mint. The token price stays at $1.00, and accrued rewards are paid as additional tokens minted to holder wallets on a daily or monthly cadence. BUIDL uses this model.
• Rebasing tokens. The token balance per wallet grows automatically as rewards accrue, so a wallet holding 1,000 tokens at the start of the month might hold 1,003.5 by the end of the month.

Allow-listed wallets are central to compliance. Before any subscription, the wallet is vetted through KYC and screened against sanctions lists. Transfers between non-approved addresses are blocked at the smart contract layer.

Tokenized Index Funds Explained

Tokenized index funds extend the same on-chain share representation to equity and multi-asset index strategies. The fund still tracks an external benchmark such as an S&P sub-index, a sector basket, or a passive blue-chip strategy, but ownership lives on-chain.

Two design patterns are emerging:

• Wrapped fund shares. A registered index fund issues a digital share class alongside its traditional class. The on-chain token represents the same interest, governed by the same prospectus.
• Synthetic index baskets. A protocol holds a basket of tokenized component assets (tokenized equities, tokenized commodities) and issues an index token against it. Rebalancing happens on-chain via smart contracts or through a regulated rebalancing agent.

Adoption lags the MMF category because equity tokenization carries trickier regulatory questions around dividend handling, corporate actions, and proxy voting. Early issuers such as Backed Finance, Ondo Global Markets, and Dinari ship tokenized equity products that compose into index baskets, but most institutional issuance is still at a pilot stage.

Major Tokenized Fund Products in 2026

The competitive environment compressed sharply between 2024 and 2026 as large asset managers moved from pilots to live products on public chains. The table below summarizes the leading offerings.

Comparison of Major Tokenized Fund Products

Product	Issuer	Launch	Network(s)	AUM (mid-2026)	Underlying portfolio
BUIDL	BlackRock / Securitize	March 2024	Ethereum, Solana, Polygon, Arbitrum, Optimism, Aptos, BNB Chain	~$2.48B	U.S. T-bills, repos, dollar balances
BENJI	Franklin Templeton	2021 (expanded 2024–2026)	Stellar, Polygon, Ethereum, Aptos, Base, Solana	~$823M	U.S. government securities
OUSG	Ondo Finance	2023	Ethereum, Solana, Polygon, others	~$612M	Mix of BUIDL, short-dated Treasuries
USDY	Ondo Finance	2023	Ethereum, Solana, Aptos, others	~$2.14B	Short-dated Treasuries, bank deposits
USYC	Hashnote (acquired by Circle)	2023	Ethereum, Canton, Solana	~$2.9B	Reverse repos backed by U.S. Treasuries
MONY	JPMorgan Asset Management	December 2025	Ethereum	Institutional (undisclosed)	Government MMF portfolio
JLTXX	JPMorgan Asset Management	May 2026	Ethereum	$100M seed	U.S. Treasury securities, overnight repos

BlackRock BUIDL

The BlackRock USD Institutional Digital Liquidity Fund launched in March 2024 with Securitize as transfer agent. By mid-2026 it sits around $2.48 billion in AUM across at least 8 networks.

The fund pays daily rewards as additional BUIDL tokens minted into holder wallets, accepts subscriptions starting at $5 million, and is approved as collateral on major derivatives platforms.

Franklin Templeton BENJI

The Franklin OnChain U.S. Government Money Fund (BENJI) was the first tokenized MMF, launching in 2021 on Stellar. By 2026 it had expanded to Polygon, Canton, Ethereum, Arbitrum, Base, Aptos, Avalanche, and Solana.

Each token equals one share at NAV $1.00, with daily reward distributions accruing on-chain.

Ondo OUSG and USDY

Ondo Finance operates two flagship products. OUSG is a tokenized short-term Treasury product whose underlying allocation now flows substantially through BUIDL. USDY is structured as a reward-bearing note for non-U.S. holders.

Combined AUM across the two products sat near $3 billion as of mid-2026.

Hashnote and Circle USYC

USYC was launched by Hashnote and later folded into Circle following the acquisition. The token briefly overtook BUIDL on January 22, 2026, at roughly $2.98 billion AUM, helped by deep integration with crypto-native venues as collateral.

JPMorgan MONY and JLTXX

JPMorgan Asset Management launched MONY on Ethereum in December 2025, then filed and launched JLTXX (JPMorgan OnChain Liquidity-Token Money Market Fund) on May 12–13, 2026.

JLTXX is explicitly engineered as a compliant reserve asset for stablecoin issuers under the GENIUS Act, with $100 million seeded by JPMorgan and Anchorage Digital at launch.

Tokenized Bonds and Broader RWA Funds

Beyond MMFs, tokenization is moving into longer-duration fixed income and private credit. Tokenized corporate bonds hold approximately $1.77 billion in total value as of early 2026, with issuers including BlackRock and Securitize piloting broader fixed-income wrappers.

Private credit tokenization is larger by some measures. On-chain principal has reached around $5 billion per RWA.xyz, with a broader count closer to $18–19 billion when platform-locked positions are included.

Other RWA fund categories scaling in 2026:

• Tokenized commodities, dominated by gold-backed tokens (XAUT, PAXG) at roughly $5.55 billion combined.
• Tokenized real estate funds via Securitize, RealT, and regional issuers.
• Tokenized private equity sleeves from KKR, Hamilton Lane, and Apollo, distributed through Securitize.

The unifying thread is the legal architecture. Each token carries the same interest as the underlying share or note, which makes the category categorically different from purely synthetic crypto exposure.

Why This Happened: the GENIUS Act and CLARITY Act

The structural turning point was U.S. legislation. The GENIUS Act, enacted in July 2025, defines permitted reserve assets for payment stablecoin issuers and explicitly allows those reserves to include tokenized money market fund shares.

That single provision rewired demand. Payment stablecoin issuers, which collectively back over $300 billion in outstanding tokens, now have a regulated route to allocate reserves into on-chain MMF shares while retaining the operational benefits of on-chain settlement. JLTXX was designed for exactly that use case.

The GENIUS Act (July 2025) lets permitted payment stablecoin issuers hold tokenized money market fund shares as reserves, creating a regulated demand channel from a stablecoin float exceeding $300 billion.

Two further regulatory layers are pending or partially built:

• CLARITY Act progress through 2026 is sharpening the boundary between commodities (under CFTC jurisdiction) and securities (under SEC jurisdiction) for digital assets.
• FDIC and OCC notices of proposed rulemaking in April 2026 built out the operational framework, including reserve segregation and disclosure standards for permitted stablecoin issuers.

Payment stablecoins themselves cannot pay reward distributions under the GENIUS Act, which channels holder demand for on-chain dollar exposure with periodic payouts toward tokenized MMFs and short-duration fund tokens. Legal review required for any specific issuer assessment.

Reward-Bearing Stablecoins and the Fund-Stablecoin Convergence

The line between a tokenized MMF and a “reward-bearing stablecoin” is now mostly legal, not technical. Both maintain a near-$1.00 price, both pay token holders out of an underlying Treasury portfolio, and both transfer peer-to-peer between approved wallets.

The distinction is the wrapper. Products like Ondo USDY and Mountain USDM are structured as notes rather than registered funds. They are not payment stablecoins under the GENIUS Act, which keeps them out of U.S. consumer payment rails, but they remain available to non-U.S. holders.

Tokenized MMFs (BUIDL, BENJI, JLTXX, MONY) are registered securities. They cannot be used directly as payment instruments by retail users in most U.S. settings, but they qualify as permitted stablecoin reserves under the GENIUS Act.

The practical effect is a three-layer stack:

• Layer 1: GENIUS-compliant payment stablecoins (non-reward, par-pegged) for transactional use.
• Layer 2: Tokenized MMFs held by issuers as reserves, generating reward distributions that flow back to issuers.
• Layer 3: Tokenized notes (USDY, USDM) available to qualifying non-U.S. holders seeking direct reward exposure.

Market Size and Growth

Total on-chain tokenized real-world assets (excluding stablecoins) reached approximately $31.4 billion by mid-May 2026, per RWA.xyz and DefiLlama, up from roughly $6 billion at the start of 2025.

Tokenized U.S. Treasuries are the dominant subcategory at approximately $15.3 billion as of May 2026, holding roughly 45.21% of the total RWA market. Tokenized commodities (largely gold) sit around $7 billion, while private credit and corporate bonds make up most of the remainder.

Tokenized U.S. Treasury products grew from under $1 billion in early 2024 to over $15 billion by April 2026, with BlackRock BUIDL, Circle USYC, and Franklin BENJI holding the largest single-product positions.

By comparison, the stablecoin market sits above $300 billion, meaning tokenized RWA is roughly 10% of the broader on-chain dollar economy. Boston Consulting Group and Standard Chartered project that the tokenization market could reach $16 trillion by 2030, suggesting the runway is still largely untouched.

Compliance, KYC, and Whitelisting Mechanics

Allow-listed wallet logic is what makes tokenized funds work inside existing securities and AML frameworks. Before any subscription, the transfer agent runs KYC and sanctions screening on the wallet owner. The wallet address is then added to an on-chain allow list maintained by the token contract.

Smart contracts enforce three categories of restriction:

• Transfer restrictions that block movement to any non-allow-listed address.
• Holder caps and jurisdiction filters that prevent sales into restricted markets.
• Lock-up and freeze functions that let the transfer agent halt transfers in response to a court order, sanctions designation, or compliance event.

The dominant token standard for this is ERC-3643 (formerly T-REX), a permissioned token framework that builds compliance hooks directly into the contract. ERC-1400 and proprietary variants from Securitize and Tokeny address the same problem with different architectural choices.

The result is that a tokenized fund share behaves like its traditional counterpart in every legal sense. Ownership, recordkeeping, dividend handling, and redemption rights all flow through familiar transfer-agent infrastructure. Only the settlement layer changes.

Custody and Settlement Infrastructure

Tokenized fund issuance on public chains depends on a stack of institutional staking infrastructure that institutional asset managers cannot ignore. The settlement layer (Ethereum, Solana, Polygon) must be available, performant, and secure.

Validator infrastructure underpins each of these networks. A validator confirms transactions, secures the chain through proof-of-stake consensus, and provides the operational backbone that lets fund administrators have reasonable settlement expectations.

Everstake operates non-custodial validator infrastructure across the public chains where most tokenized fund issuance settles, including Ethereum, Solana, and Polygon.

• SOC 2 Type II audited controls.
• ISO 27001 information security certification.
• NIST CSF-aligned security posture.
• Slashing protection and other procedures suited to fund-grade workflows (provided on request or on a case-by-case basis).

For asset managers running tokenized share classes on public chains, the validator layer is a dependency in the same way that custody and transfer agency are.

Risks and Open Questions

Tokenized funds carry a number of risks that traditional MMFs do not. The most material is summarized below.

Smart Contract Risk

Any bug in the token contract or transfer-agent logic can lead to misdirected mints, frozen balances, or compliance failures. Audits and formal verification reduce but do not eliminate this risk.

Oracle and NAV Risk

Daily NAV needs to flow on-chain through a price oracle or administrator attestation. A delay, a stale feed, or a misconfigured oracle can misstate distributions or trigger downstream errors in protocols that consume the token as collateral.

Liquidity Risk on Secondary Markets

Most tokenized fund tokens are redeemable directly with the issuer on a T+0 or T+1 basis but lack deep secondary markets. In a stress scenario, the redemption queue can lengthen, and the on-chain price can drift from NAV.

Regulatory Fragmentation

Treatment varies across jurisdictions. A token compliant under U.S. rules may not qualify for distribution in the EU under MiCA, and vice versa. Cross-border holder bases require parallel legal opinions.

Custody Concentration

A large share of tokenized fund assets currently sits with a small number of qualified custodians and transfer agents. Failure or compromise at one of these counterparties would have outsized effect on the segment.

Outlook for 2026 to 2027

Three trajectories appear durable through 2027.

First, index fund tokenization scales beyond pilots. With the MMF wrapper now well understood, the same playbook (registered share class, allow-listed wallets, smart-contract compliance) is being applied to passive equity and multi-asset strategies.

Second, cross-chain issuance is now the default. BUIDL sits on at least 8 networks. New launches arrive multi-chain from day one. Bridging logic and cross-chain messaging (CCIP, LayerZero, Wormhole) are increasingly part of fund infrastructure.

Third, agentic and programmatic commerce rails are starting to consume tokenized MMFs as the default reserve asset for AI agents and automated treasury workflows. The token’s combination of reward distributions, instant settlement, and on-chain transparency suits machine-driven counterparties.

FAQ

What is the BUIDL fund?

BUIDL is the BlackRock USD Institutional Digital Liquidity Fund, a tokenized money market fund launched in March 2024 with Securitize as transfer agent. It holds U.S. Treasury bills and repos, pays daily reward distributions, and is available on at least 8 public blockchains. AUM was approximately $2.85 billion as of mid-2026.

What is the difference between a tokenized MMF and a stablecoin?

A tokenized MMF is a registered fund share that pays reward distributions from an underlying Treasury portfolio. A payment stablecoin under the GENIUS Act is a non-reward payment instrument backed 1:1 by qualifying reserves. Both can transfer on-chain, but only the stablecoin functions as a payment instrument in U.S. consumer commerce.

Are tokenized funds regulated?

Yes. Tokenized MMFs issued in the U.S. are registered under the Investment Company Act of 1940 with the SEC. Tokenized notes and offshore fund products operate under exemptions or non-U.S. fund regimes. Each product carries the same regulatory wrapper as its traditional counterpart.

Who can hold tokenized money market funds?

Most current products are limited to qualified or accredited holders with high subscription minimums (often $1 million or more). BUIDL‘s minimum is $5 million. Some products with offshore note structures (USDY) are available to non-U.S. retail holders.

How does redemption work?

The holder sends fund tokens back to the issuer’s smart contract. The contract burns the supply, and the transfer agent disburses USD or a regulated stablecoin to the holder’s bank or wallet, typically same-day or T+1.

On which blockchain is BUIDL issued?

BUIDL is live on Ethereum, Solana, Polygon, Arbitrum, Optimism, Aptos, and BNB Chain as of 2026.

What is the GENIUS Act?

The Guiding and Establishing National Innovation for U.S. Stablecoins Act, enacted in July 2025, defines the U.S. federal framework for permitted payment stablecoin issuers, including which assets qualify as reserves. Tokenized government money market fund shares are explicitly permitted reserves, which have driven institutional demand into tokenized MMF products.

How do tokenized Treasuries and stablecoins compare?

They are structurally different. A tokenized Treasury MMF carries a direct legal claim on Treasury portfolio assets under fund regulation. A payment stablecoin is a claim on the issuer backed by qualifying reserves. Both have credit and operational risk. Tokenized MMFs add smart contract and oracle risk that traditional reserve structures do not.

Disclaimer

This article is provided for informational purposes only. Nothing in this article constitutes legal advice, financial advice, investment advice, tax advice, or any other form of professional advice, nor should it be construed as such. The information presented does not represent a recommendation, solicitation, or offer to buy or sell any security, financial product, or instrument.

References to specific funds, products, issuers, protocols, legislation, or market data are included solely for illustrative and educational purposes. Such references do not constitute an endorsement, promotion, or sponsorship of any product, service, company, or regulatory position. Legal review is required for any specific issuer, product, or regulatory compliance assessment.