Tokenized Money Market Funds Explained: Yield, Risk, and How They Work On-Chain
By Jorge Rodriguez — Tokenized Assets
How BlackRock BUIDL, Franklin Templeton BENJI, and Ondo USDY differ in structure, access, and yield
A direct comparison of tokenized MMFs, T-bill stablecoins, and fiat-backed stablecoins in one table
The Solana tMMF ecosystem: which products are live and how they integrate with Solana DeFi
Introduction
DeFi users collectively hold billions in zero-yield stablecoins. When short-term interest rates remain elevated, that idle capital represents a significant opportunity cost. The on-chain equivalent of a money market fund now exists and is growing rapidly, with institutions like BlackRock and Franklin Templeton leading issuance on public blockchains. **Tokenized money market funds** (tMMFs) are blockchain-based representations of traditional fund shares invested in short-duration, high-quality instruments: US Treasury bills, repurchase agreements, and cash. They bring the stability and yield profile of institutional money markets on-chain, enabling around-the-clock settlement, fractional ownership, and, in select cases, integration into DeFi protocols. This article explains how tokenized money market funds work, how the three leading issuers differ in structure and access, what yield to expect, how redemption operates in practice, and which products are live on Solana. For readers tracking live yields across tokenized RWA instruments, the [Lince Tracker](https://yields.lince.finance/tracker/solana/category/rwa) shows curated on-chain RWA opportunities in one place.
What Is a Money Market Fund and Why Does Tokenization Matter
A money market fund is an investment fund that holds short-duration, high-quality debt instruments. These typically include US Treasury bills, government agency securities, repurchase agreements (repos), and high-grade commercial paper. The mandate is capital preservation and liquidity: the fund prioritizes returning stable value over maximizing yield. Traditional money market funds are managed by licensed asset managers. Investors purchase shares, the manager deploys capital into qualifying instruments, yield accrues daily, and shares can typically be redeemed at **net asset value (NAV)** with near-instant settlement. The NAV is the per-share value of the fund's assets minus liabilities, recalculated daily. Tokenization adds a blockchain layer to this structure. Instead of recording share ownership in a centralized register maintained by a fund administrator, the fund issues tokens on a public blockchain that represent proportional fund shares. Those tokens settle in seconds, transfer between approved wallets, and in some cases serve as collateral in DeFi lending protocols. The token itself is not the underlying asset. It is a claim on the fund's NAV, enforced through the fund's legal structure and a smart contract that mints and burns tokens as investors subscribe and redeem. Tokenization changes how ownership is recorded and settled, not the credit quality of the underlying portfolio. The T-bills remain inside the fund; the blockchain tracks who owns what portion of them.
How Tokenized Money Market Funds Are Issued On-Chain
 **The Issuance Pipeline** The process begins with a licensed asset manager running a compliant money market fund. An investor completes **KYC/AML** identity verification and registers a blockchain wallet address with the fund administrator. The administrator whitelists that wallet, making it eligible to hold and receive fund tokens. The investor deposits fiat currency or, in some cases, a supported stablecoin. The fund administrator mints **securities tokens** representing the investor's proportional share of the fund's NAV and delivers them to the whitelisted wallet. From that point, yield accrues daily and is reflected on-chain through one of two mechanisms. **Rebasing model:** The token supply increases daily to reflect accrued yield. Each investor's wallet balance grows automatically without any action required. Franklin Templeton's BENJI and Ondo's USDY use this approach. **Appreciating NAV model:** The price per token rises over time while the number of tokens in circulation stays fixed. BlackRock's BUIDL uses this model. Investors hold the same token count but each token represents more fund value as yield accrues. To redeem, the investor submits a request through the fund's platform or API. The fund administrator processes the exit, burns the redeemed tokens through the smart contract, and returns value as fiat or stablecoin net of applicable fees. Some issuers offer instant swap facilities that allow redemption around the clock without waiting for the next NAV calculation.
Three Major Issuers: BUIDL, BENJI, and Ondo
The tokenized MMF market is led by three primary vehicles. Each differs in underlying structure, investor access, yield distribution method, and chain availability. **BlackRock USD Institutional Digital Liquidity Fund (BUIDL)** BUIDL launched on Ethereum and has since expanded to Solana, Polygon, Avalanche, Aptos, and Arbitrum. The underlying portfolio holds US Treasury bills, repurchase agreements, and cash, custodied by BNY Mellon and tokenized through Securitize. Access is limited to **qualified purchasers** (a US legal classification requiring $5 million or more in investments), with a minimum subscription of $500,000. This is strictly institutional access in the US. Yield is distributed daily via the appreciating NAV model: the price of each BUIDL token rises rather than the supply increasing. BUIDL offers T+0 instant redemption through a partnership with Circle, where investors can swap BUIDL tokens for USDC around the clock up to a **liquidity buffer** maintained by Circle. **Franklin Templeton OnChain U.S. Government Money Fund (BENJI / FOBXX)** BENJI is the first SEC-registered fund to record shareholder ownership on a public blockchain. It launched on Stellar and subsequently expanded to Polygon, Ethereum, and Solana. The minimum investment is $20 and there is no accredited investor requirement for US retail participants, making BENJI the most accessible tMMF for US-based individual investors. The underlying portfolio holds US government securities, repos, and cash. Yield accrues using the rebasing model: the number of BENJI tokens in an investor's wallet grows daily. Standard redemption is T+1 via the Franklin Templeton app with no instant swap facility equivalent to BUIDL's Circle arrangement. **Ondo USDY and OUSG** Ondo USDY is a yield-bearing note backed by short-term US Treasuries and bank demand deposits. Structured as a promissory note rather than a registered fund, USDY carries a lighter regulatory burden. It is accessible to non-US individuals and institutional buyers in many jurisdictions, though direct purchase is not available to US retail investors. USDY uses the rebasing model, with yield accruing daily. On Solana, USDY has the deepest DeFi integrations of any tMMF product, appearing as collateral in lending protocols such as Kamino and Marginfi. Ondo's OUSG, a fund structure for institutional buyers, offers instant redemption through a dedicated liquidity mechanism separate from USDY.
Yield Profile: What Returns Can You Expect
Yield on a tokenized money market fund tracks prevailing short-term US Treasury rates, specifically the **federal funds rate** and **SOFR** (Secured Overnight Financing Rate). These benchmarks set the floor for T-bill returns, which flow directly into fund yield after fees. Gross yield typically ranges from 4 to 5.5 percent annualized during elevated rate environments. Fund management fees range from approximately 0.15 to 0.50 percent annually. **Net yield** delivered to token holders is gross yield minus the fund's expense ratio, which varies by issuer. In rate-cutting cycles, yield on tMMFs compresses alongside the broader rate environment. Comparing tMMF yield to alternative on-chain options requires context. Holding USDC in a non-yield wallet generates zero return. Stablecoin lending yields in active DeFi markets typically range from 6 to 12 percent, though these rates fluctuate with borrowing utilization. Liquidity provision and leveraged strategies can reach higher nominal yields but carry impermanent loss, liquidation risk, and additional protocol exposure. Tokenized MMF yield is **rate-sensitive** and predictable within a given rate environment. It is not fixed. There is no impermanent loss risk and no smart contract yield variability at the protocol level, since yield originates from the underlying fund's portfolio rather than on-chain incentive structures. Risk resides in the fund wrapper itself, not in the smart contract mechanics.
Tokenized MMFs vs T-Bill Stablecoins vs Fiat-Backed Stablecoins
The most useful framework for understanding where tokenized MMFs fit is a direct comparison against the two other major on-chain yield vehicles: T-bill stablecoins and fiat-backed stablecoins. Each reflects a different balance of yield, composability, and regulatory structure. For a deeper look at how T-bill stablecoins work, see the guide to [T-bill backed stablecoins](/blog/stablecoins/t-bill-backed-stablecoins-explained). For a breakdown of fiat stablecoin risk tiers, see [stablecoin risk tiers](/blog/stablecoins/stablecoin-risk-tiers). | Feature | Tokenized MMF (BUIDL, BENJI) | T-Bill Stablecoin (USDM, USDtb) | Fiat-Backed Stablecoin (USDC, USDT) | |---|---|---|---| | Native yield | Yes (4-5.5% gross) | Yes (passes T-bill rate) | No (issuer keeps yield) | | Peg mechanism | Rising NAV or rebasing | Designed to hold $1 via backing | $1 fiat/cash backing | | On-chain composability | Limited (whitelisted wallets only) | High (standard ERC-20/SPL token) | Very high (universal DeFi standard) | | KYC required | Yes (fund-level KYC) | Varies (lighter for most) | Minimal (wallet-level) | | Regulatory status | Registered security or Reg D exempt | Varies (note, not fund) | Payment instrument | | Redemption | T+0 via swap or T+1 via fund | Near-instant (most products) | Instant to near-instant | | Counterparty | Fund admin and custodian bank | Issuer and T-bill custodian | Issuer (Circle, Tether) | | DeFi collateral use | Restricted to whitelisted protocols | Growing acceptance | Universal | | Min. investment | $500k (BUIDL) / $20 (BENJI) / low (USDY) | Usually $1 | $1 | Tokenized MMFs deliver yield from regulated underlying assets but sacrifice the permissionless **composability** that makes stablecoins useful in DeFi. A USDC holder can deposit into any Solana lending pool without onboarding. A BUIDL holder cannot. The whitelisting requirement is the fundamental architectural constraint. T-bill stablecoins occupy the middle ground. They pass Treasury yield to token holders, maintain a $1 peg, and are generally composable in DeFi without wallet-level whitelisting. Their regulatory structure is lighter than a registered fund, which creates a different risk profile for holders to evaluate. Fiat-backed stablecoins win on liquidity and composability. They lose entirely on native yield.
Redemption Mechanics: How You Get Your Money Out
 Understanding redemption is practical knowledge for anyone holding or considering tMMF tokens. Two primary redemption paths exist: standard settlement and instant swap. **Standard Redemption (T+1 to T+2)** The investor submits a redemption request through the fund's platform or API. The fund administrator processes the request at end-of-day NAV. Settlement arrives as fiat currency or stablecoin to the investor's registered account, typically within one to two business days. The smart contract burns the investor's tokens upon confirmation of settlement. Franklin Templeton's BENJI standard redemption follows this path with no additional swap facility. **Instant Redemption via Stablecoin Swap (T+0)** Some issuers partner with stablecoin issuers to maintain a **liquidity buffer**: a reserve of stablecoins ready to absorb tMMF tokens at current NAV around the clock. BUIDL offers this through a Circle partnership, enabling investors to swap BUIDL for USDC at any time including outside traditional market hours. Ondo's OUSG has a comparable instant mechanism for its institutional share class. The instant facility is effective for redemptions within the buffer's capacity. Large concurrent redemptions exceeding the buffer may enter a **redemption queue** and settle at T+1. This queue risk is distinct from portfolio risk: the fund's NAV is stable because assets are invested in T-bills rather than equities, but processing delays are possible during high-volume exit conditions. **Token Burn Mechanics** When a redemption settles, the fund administrator instructs the smart contract to burn the redeemed tokens. This reduces circulating supply and reflects the reduction in investor participation. The burn is atomic with settlement confirmation, preventing any double-claim on redeemed NAV. For rebasing models, the daily yield accrual stops for burned tokens on the day of settlement.
Regulatory Status and Investor Access
Regulatory structure determines who can access each tMMF product and under what conditions. Understanding this before attempting to subscribe prevents compliance failures at the wallet level. **BUIDL** is offered under **Section 3(c)(7)** of the US Investment Company Act, which exempts the fund from SEC registration. Access is limited to qualified purchasers and institutional equivalents. This is strictly institutional access within the US. **BENJI (FOBXX)** is SEC-registered and available to US retail investors through the Franklin Templeton app with a $20 minimum. This makes it the only broadly accessible tMMF product for US individual investors. The fund's blockchain-based share registry is a structural innovation inside a conventional regulatory framework. **USDY** is structured as a promissory note rather than a registered fund. This lighter regulatory structure means USDY is available to non-US individuals and certain institutional buyers with a relatively accessible KYC process. US retail investors are excluded from direct USDY purchase but can interact with USDY as DeFi collateral in some protocols without holding it directly. US legislation has explicitly barred stablecoins from paying yield, preserving the regulatory distinction between payment instruments and yield-bearing investment products. This creates a structural advantage for tMMFs as the designated on-chain vehicle for government-securities-backed yield. In the EU, existing tokenized fund products typically use a UCITS structure. MiCA regulation does not yet provide an equivalent tokenized fund framework, so EU-accessible products operate under existing fund law. Regardless of jurisdiction, all tMMF products require **whitelist** registration: each wallet address holding or receiving fund tokens must have passed KYC and been approved by the fund administrator. A transfer to an unwhitelisted wallet fails at the smart contract level. For a broader comparison of how RWA yield stacks up against DeFi-native sources, see [RWA vs DeFi Yield: Understanding the Tradeoffs](/blog/tokenized-assets/rwa-yield-vs-defi-yield-comparison).
Tokenized Money Market Funds on Solana
 Solana has emerged as a significant venue for tMMF issuance, driven by three structural advantages: near-zero transaction fees (averaging a fraction of a cent per transaction), sub-second finality, and growing institutional custody infrastructure from providers including Anchorage, Fireblocks, and Coinbase Institutional. These properties make daily NAV updates and yield distributions economically viable without transaction costs eroding returns. They also enable T+0 redemption mechanics that are impractical on chains where gas fees or slow finality create friction at the protocol layer. **Live tMMF Products on Solana** BUIDL expanded to Solana following its Ethereum launch. The Solana version carries the same qualified purchaser requirements and $500,000 minimum as the Ethereum version. For institutional participants already onboarded to Securitize, the Solana BUIDL token provides the same yield profile with Solana's settlement characteristics. Ondo USDY has the deepest DeFi integration of any tMMF on Solana. USDY is accepted as collateral in Kamino and Marginfi lending pools, enabling Solana DeFi participants to earn T-bill yield while keeping assets on-chain and usable across the broader DeFi stack. This level of composability is rare for a tMMF product and positions USDY as the de facto tMMF for Solana-native DeFi activity. WisdomTree expanded its full regulated tokenized fund suite to Solana. Retail investors can on-ramp USDC from a Solana wallet directly into WisdomTree funds and off-ramp to self-custody wallets, positioning it as one of the most accessible institutional-grade tMMF products for non-US retail users. Franklin Templeton BENJI has been part of Franklin Templeton's multi-chain expansion strategy, which includes Solana alongside Stellar, Polygon, and Ethereum. **Accessing tMMFs on Solana** • BUIDL: via the Securitize platform (institutional, $500k minimum) • USDY: via the Ondo Finance app (non-US individuals, lighter KYC) • WisdomTree funds: via the WisdomTree Prime app (retail, USDC on-ramp from Solana) • Indirect exposure: USDY appears as collateral in Kamino lending pools, enabling DeFi users to interact with USDY-backed yield positions through standard Solana interfaces To monitor USDY and other RWA yields live on Solana, the [Lince Tracker RWA category](https://yields.lince.finance/tracker/solana/category/rwa) aggregates current yield rates across tokenized real-world asset protocols on Solana.
Risks and Limitations to Understand
**Rate Risk** Yield on a tMMF tracks short-term rates. A rate-cutting cycle compresses yield directly. A product generating 5 percent in a high-rate environment may deliver 3 percent or less after central bank rate reductions. This is a floating-rate instrument by nature, not a fixed-income product with a locked coupon. **Regulatory Risk** tMMF tokens are securities in most jurisdictions. Regulatory reclassification, sanctions, or compliance failures by the issuer could trigger redemption gates, transfer restrictions, or asset freezes. BUIDL tokens are non-transferable without whitelist authorization, making the investor's continued access contingent on the issuer's ongoing regulatory standing. **Counterparty and Custodial Risk** Unlike DeFi-native protocols, tMMFs rely on a fund administrator and custodian bank. The smart contract holds a claim on the fund, not the underlying T-bills directly. The custodian, fund administrator, and tokenization platform each represent a layer of counterparty exposure that does not exist when holding native on-chain assets. **Liquidity and Composability Risk** Whitelisted-wallet restrictions mean tMMF tokens cannot be freely traded on decentralized exchanges or used as collateral in permissionless lending markets. Liquidity depends on the issuer's redemption facility, not on open market depth. USDY is the most composable tMMF option in DeFi, but it is still protocol-specific rather than universally usable. **Access Limitations** Most tMMF products require institutional access or exclude US retail participants. BENJI is the main exception for US retail. Non-US readers have broader options, with USDY and WisdomTree's Solana products being the most accessible entry points. For a framework on evaluating counterparty risk across DeFi and tokenized products, see [RWA vs DeFi Yield: Understanding the Tradeoffs](/blog/tokenized-assets/rwa-yield-vs-defi-yield-comparison).
Common Misconceptions
Several persistent misunderstandings circulate about tokenized money market funds. Addressing them directly prevents mispriced risk and incorrect product expectations. **A tokenized MMF is just a stablecoin with yield.** It is not. A tMMF token is a security representing a proportional fund share. It is regulated as a financial instrument, with investor access gated by KYC and in many cases qualified purchaser or accredited investor requirements. A stablecoin is a payment instrument designed to maintain a fixed peg. Conflating them leads to miscalculated risk and incorrect expectations about composability, regulatory treatment, and transferability. **The token price is always $1.** Appreciating NAV models like BUIDL have a rising price per token, not a $1 peg. Rebasing models like BENJI and USDY adjust supply to maintain effective $1 NAV per token, but this is a supply adjustment mechanism rather than the same structural guarantee as fiat backing. The distinction matters for accounting, on-chain pricing, and integration with DeFi protocols that expect a fixed-peg asset. **You can use tMMF tokens freely in any DeFi protocol.** Transfers are restricted to whitelisted wallets. This is a fundamental composability limitation relative to USDC or USDT. Sending BUIDL to an unwhitelisted wallet will fail at the contract level. USDY has the broadest DeFi integration on Solana, but it is still protocol-specific and not universally usable across all lending markets. **KYC is a one-time step and then the token moves freely.** Each receiving wallet must also be whitelisted for transfers. An investor attempting to send BUIDL to a second wallet that has not been registered and approved by Securitize will find the transaction reverted. This makes tMMF tokens fundamentally non-standard DeFi assets: they behave more like permissioned securities than programmable money.
Conclusion
Tokenized money market funds offer a regulated, yield-bearing alternative to holding zero-yield stablecoins on-chain. They bring T-bill rates into the blockchain environment with institutional-grade custody, daily NAV accrual, and, in some cases, instant redemption via stablecoin swap facilities. The tradeoff is composability: tMMF tokens are securities, not payment instruments, and they carry whitelisting requirements that limit their use in permissionless DeFi. They are best suited for treasury management, institutional on-chain liquidity, and DeFi users who want stable, predictable yield and are willing to navigate the KYC process. T-bill stablecoins occupy a middle ground for users prioritizing composability with yield. Fiat-backed stablecoins remain the default for liquidity and universal DeFi use. For investors who want exposure to yield-bearing instruments alongside DeFi strategies without managing protocol research manually, [Lince Smart Vaults](https://app.lince.finance) automatically allocate across curated Solana DeFi protocols, including positions with RWA exposure.
FAQ
### What is a tokenized money market fund? A tokenized money market fund is a blockchain-based representation of a traditional money market fund share. The underlying fund invests in short-duration, high-quality instruments such as US Treasury bills and repurchase agreements. The token represents a proportional claim on the fund's net asset value and is issued, transferred, and redeemed on a public blockchain through a smart contract. ### How is a tokenized MMF different from a stablecoin? A stablecoin is a payment instrument designed to maintain a fixed $1 peg. It does not natively generate yield and is regulated as a payment product. A tokenized MMF is a security representing a fund share. It generates yield from underlying assets and is regulated as a financial instrument, with investor access gated by KYC and, in many cases, qualified or accredited investor requirements. ### What yield can I expect from a tokenized money market fund? Yield tracks prevailing short-term US Treasury rates. In elevated rate environments, gross annualized yield has typically ranged from 4 to 5.5 percent, net of fund fees. This yield is stable relative to DeFi rates but is rate-sensitive: it compresses when central banks cut rates and rises in tightening cycles. It is not a fixed-coupon instrument. ### Are tokenized money market funds available to retail investors? It depends on the issuer and jurisdiction. Franklin Templeton's BENJI is SEC-registered and available to US retail investors via the Franklin Templeton app with a $20 minimum. BlackRock's BUIDL requires qualified purchaser status with a $500,000 minimum. Ondo's USDY is accessible to non-US individuals with lighter KYC, making it the most accessible option for international retail users. ### Can I use tokenized MMF tokens in DeFi protocols? Only in protocols that have integrated the specific token and passed whitelisting requirements. Ondo USDY has the broadest DeFi integration on Solana, appearing as collateral in lending protocols like Kamino and Marginfi. BUIDL and BENJI tokens cannot be freely transferred to arbitrary DeFi protocols due to whitelist restrictions at the smart contract level. ### What happens if I want to redeem my tokenized MMF? Standard redemption takes T+1 to T+2 and returns fiat or stablecoin to your registered account. Some products offer instant redemption via a stablecoin swap facility: BUIDL can be swapped for USDC through Circle around the clock up to a liquidity buffer. Large redemptions may queue into the standard T+1 settlement window if the buffer is exceeded. ### Are tokenized money market funds available on Solana? Yes. BlackRock BUIDL, Ondo USDY, WisdomTree's tokenized fund suite, and Franklin Templeton BENJI are all present on Solana. Ondo USDY has the deepest Solana DeFi integration and is used as collateral in Solana lending markets including Kamino and Marginfi. ### What is the regulatory status of tokenized money market funds? BUIDL operates under Section 3(c)(7) of the US Investment Company Act, restricting access to qualified purchasers and exempting the fund from SEC registration. BENJI is SEC-registered and available to US retail investors. USDY is structured as a promissory note with a lighter regulatory footprint. US legislation bars stablecoins from paying yield, which structurally distinguishes tMMFs as the regulated yield-bearing on-chain alternative to traditional stablecoins.