Circle's USYC Overtakes BlackRock's BUIDL

In January 2026, Circle's USYC quietly passed BlackRock's BUIDL to become the largest tokenized treasury product on the market. The shift wasn't just about size. It revealed a fundamental divide in how institutions think about yield-bearing digital assets.

Michael Rodriguez spent eighteen years as a treasury operations director at a mid-sized regional bank before joining a digital asset fund in early 2025. By December, he was managing $340 million in tokenized treasury positions and discovering a truth that would have seemed absurd in his banking days: the world's largest asset manager wasn't necessarily offering the best product.

"We started with BUIDL because the name recognition made compliance conversations easier," Rodriguez explains. "But when we actually compared the operational realities, the decision became more complex."

The Numbers Behind the Shift

The tokenized treasury market reached $3.5 billion in January 2026, with two products dominating the institutional conversation. Circle's USYC hit $1.69 billion, narrowly surpassing BUIDL's $1.68 billion.

But raw AUM tells only part of the story. BUIDL's trajectory reveals more: after peaking near $3 billion in mid-2025, the fund experienced $447 million in outflows during August alone. By December, it had stabilized around $2 billion before declining further to current levels.

USYC's growth, meanwhile, accelerated following Circle's July 2025 partnership with Binance, which now holds approximately 94% of USYC supply as collateral for institutional trading. This concentration in a single relationship underscores an important nuance: the "overtake" reflects strategic platform adoption as much as broad institutional preference.

Why Deposit Tokens Are Winning

The divergence isn't about yield differential. Both products offer roughly 4.25-4.50% returns tied to short-term Treasury rates. The difference lies in what each product actually represents.

BUIDL operates as a tokenized fund, holding Treasury securities and offering daily liquidity with a $5 million minimum investment. Investors own fund shares represented on blockchain. USYC functions as a deposit token, backed by Treasury reserves but structured as a yield-bearing stablecoin with a $100,000 minimum for non-US investors.

Distribution Strategies: Concentration vs. Fragmentation

The two products represent fundamentally different go-to-market strategies, each with distinct risk profiles.

USYC's concentrated approach: With Binance holding 94% of supply as institutional collateral, USYC's growth depends heavily on a single strategic relationship. This concentration creates counterparty risk but delivers operational simplicity—USYC remains on Ethereum, avoiding cross-chain complexity.

BUIDL's multi-chain expansion: BlackRock deployed BUIDL across eight blockchains (Ethereum, Solana, Polygon, Avalanche, Aptos, Arbitrum, Optimism, and BNB Chain) using Wormhole as its cross-chain bridge provider. This strategy maximizes accessibility across different ecosystems but introduces risks that institutional allocators should understand.

The Multi-Chain Trade-Off

Cross-chain bridges have been the primary attack vector in crypto security incidents. Wormhole itself suffered a $320 million exploit in 2022 before implementing enhanced security measures. While the "iron triangle" of BlackRock (asset management), Securitize (tokenization), and BNY Mellon (custody) maintains the underlying legal ownership regardless of which chain tokens reside on, the bridge dependency adds operational risk that single-chain products avoid.

Multi-chain deployment also creates liquidity fragmentation. With BUIDL spread across eight chains, liquidity depth on each individual chain is thinner than consolidated single-chain alternatives. This can affect execution efficiency for larger positions and introduces arbitrage complexity.

The Institutional Calculus

For Rodriguez and managers like him, the choice comes down to operational flexibility versus brand assurance. BUIDL's association with BlackRock simplifies certain compliance conversations, but creates friction in others.

"When I need to explain to auditors what USYC is, I can point to Circle's regulated entity status and the straightforward custody structure," Rodriguez notes. "BUIDL requires explaining the fund wrapper, the authorized participant process, and the limitations on what we can do with the position."

The $5 million minimum on BUIDL also creates portfolio management constraints that Rodriguez's fund finds limiting when optimizing across multiple treasury positions. USYC's lower $100,000 threshold allows for more granular allocation decisions.

What This Means for Institutional Allocation

The USYC overtake signals a broader shift in institutional thinking about tokenized assets. Early adopters chose products based on issuer reputation. Mature allocators increasingly prioritize operational utility.

This doesn't mean BUIDL is failing. The product maintains substantial assets and continues attracting institutional capital. But the growth differential suggests that composability and flexibility are becoming more important than brand recognition in product selection.

For treasury managers evaluating tokenized yield products, the lesson is clear: the best product isn't necessarily the one with the most famous name. It's the one that fits your operational reality.

Note: Michael Rodriguez is a composite character representing common treasury management challenges in the digital asset space. This case study is presented for educational purposes only.