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Tuesday, May 7, 2024

TFUND: Tokenized US Treasury Bills by Cogito Finance

TFUND token

Imagine being able to invest in US Treasury Bills in a matter of seconds, regardless of where you are based, with a yield of up to 5% yearly - all onchain.

This is what TFUND allows you to do.

But let’s look more closely at what it offers and how it is set up.

What is TFUND?

TFUND is Cogito Finance’s investment fund that allows you to invest in tokenized US T-Bills.

Tokenized Treasury Bills are digital representations of U.S. government bonds that can be traded as tokens on the blockchain. Each token represents ownership or a claim to the underlying T-Bill, with the rights and obligations encoded within smart contracts.

The maturity period is 0-3 months. The underlying asset is SGOV, a BlackRock iShares 0-3 Month Treasury Bond ETF, offered by one of the most well-known asset managers and leading providers of investment, advisory, and risk management solutions in the world.

Available on the Ethereum network, TFUND tokens can be exchanged for USDC, with a minimum investment of $100,000.

Why US Treasury Bills?

US Treasury bills are considered to be one of the lowest-risk and most liquid investments available.

So why tokenize traditional finance assets when the capital market is already highly liquid?

The answer boils down to the lack of accessibility of US Treasury Bills if you are not a US citizen or an off-shore company. Many-a-times foreign investors undergo the hassle of opening a brokerage account which, in itself, can be very time consuming, in order to gain access to these securities.

Blockchain technology is the key to expanding the reach of traditional finance assets beyond geographical boundaries. The onchain tech aids a seamless and inclusive global market where investors from around the world can access and participate in the ownership of traditional financial assets that they were once excluded from.

Furthermore, the significant increase in yields on US Treasury bonds over the last two years has resulted in a surge in demand for their tokenized counterparts.

Since January 2023, there has been an almost tenfold rise in market value, while the announcement of TradFi behemoths entering the space in March, led to an 18% increase.

Moreover, as of April 2024, it has been reported that “the AUM of tokenized T-Bill shot up by over 42% within 2 months”.

Another distinct aspect of treasury bills is their risk-free nature: by all accounts, a very attractive option for low-risk investors.

Coupled with the main characteristics of blockchain technology (transparency, composability, immutability, security, and more), it is easy to see how TFUND can be a very valid addition to an investment portfolio.

Overall advantages

  • Low Risk: Assets with investment-grade ratings, such as AAA-rated U.S. sovereign bonds, provide stability, security, and high liquidity, with a daily trading volume exceeding $100 billion.
  • Appealing Returns: Given the anticipated sustained elevation of the Federal Reserve rate, fixed-income products present an attractive option for crypto-native investors who have limited access to this asset class.
  • Fully Compliant and Backed by Institutional Partners: Cogito Finance collaborates with reputable and regulated partners to ensure adherence to regulations and the mitigation of risks.
  • 24/7 Immediate Settlement: Utilizing smart contracts enables instant on-chain investment and redemption, granting investors greater flexibility and convenience.
  • Real-Time Accountability: Chainlink’s proof-of-reserves offers cryptographic verification that the fund tokens are underpinned by assets held in secure custodian accounts.
  • Transferability and Composability: Fund tokens can be staked and transferred across various protocols, maximizing capital efficiency and flexibility for investors, and unlocking new potential use cases.

How does it work?

Investors will go through the Know Your Customer (KYC) process to be whitelisted for TFUND. This is an important step because TFUND is a tokenized security, fully regulated and compliant.

Once the investor is whitelisted, they will be able to submit investment agreement. After that, they will be able to freely mint and redeem TFUND tokens with our smart contracts via the Cogito Finance platform.

Investor's stablecoins are then transferred from the smart contract to the fiat off-ramp provider and invested to BlackRock's SGOV ETFs (T-Bill Bonds) by our qualified custodian and broker.

Our regulated fund administrator will provide Net Asset Value (NAV) calculations.

Who can invest in it?

Both private and institutional investors can access TFUND; they must first complete the KYC process, after which they will be whitelisted and therefore freely interact with the platform.

In general, it can cater to:

  1. DAOs
    A DAO’s cash reserves can be put to work with T-Bills rather than holding it idle.
  2. DeFi Protocols
    Yield opportunities for users are boosted by integrating tokenized traditional fixed-income assets.
  3. Institutions
    Institutional investors can access mature traditional financial products on the blockchain to benefit from reduced costs, increased liquidity, and operational efficiency.
  4. Private investors
    Those who are tech-savvy and want to diversify their portfolio can access traditional finance opportunities with the added benefits of blockchain technology.

The low risk these securities offer make them particularly appealing to risk-averse investors who value the combination of liquidity and security.

How to invest in Cogito Finance’s TFUND

As an investor, you can access Cogito’s investment platform and start firstly the KYC process.

KYC stands for Know Your Customer, and, as a fully regulated company, Cogito Finance offers its services only to those who have gone through this process and are fully approved.

Once whitelisted, you will be able to buy and sell TFUND directly from your dashboard.

Where to find more information

For more detailed information, head on over to our TFUND Docs where you can find further details on the project.

FAQ

What is the minimum investment amount for TFUND?

The minimum amount is $100,000.

Can I sell my TFUND before the T-Bill matures?

Yes, you are allowed to redeem your tokens before the bill matures.

  • Tokenization
  • U.S. T-Bills