Are Tokenized Treasury Bills Halal? BUIDL, USTB and On-Chain Riba

Tokenized treasuries went from a curiosity to one of the largest categories in crypto in about two years, and the pitch is genuinely appealing: 4.5 to 5 percent, settlement in minutes instead of T+2, and an ERC-20 you can hold in the same wallet as your ETH. So the question gets asked constantly in Muslim investor circles. Are tokenized treasury bills halal when the wrapper is a blockchain token rather than a brokerage line item?

The short answer is that the wrapper does not touch the contract underneath, and the contract underneath is a loan at interest. The headline ruling is the easy part. What takes more work is the second-order stuff: what happens with a governance token like ONDO whose issuer earns fees on Treasury yield, whether the classical debate on selling debt changes anything here, and what a retail investor is actually supposed to park cash in instead.

What BUIDL, USTB and USDY actually do

These three get lumped together as "tokenized T-bills" and they are built differently, which matters for the analysis.

BUIDL is the BlackRock USD Institutional Digital Liquidity Fund, tokenized and administered on-chain by Securitize. It is structured as a British Virgin Islands professional fund, distributed to accredited US investors under Regulation D Rule 506(c), with BNY Mellon custodying the underlying assets. The portfolio is US Treasury bills, cash, and overnight repurchase agreements. The token is designed to sit at $1.00, and yield accrues daily then arrives as freshly minted BUIDL tokens dropped into your whitelisted wallet on the first business day of each month. By mid-2026 it sits around $2.4 billion, the largest fund in the category.

USTB is the Superstate Short Duration U.S. Government Securities Fund, an ERC-20 live on Ethereum, Solana and Plume, with Invesco taking over as investment manager in March 2026. It holds short-duration Treasury and agency paper and targets the federal funds rate at a 0.15 percent management fee. The mechanical difference from BUIDL is that USTB does not distribute. NAV per share started at $10.000000 and simply climbs as interest income accrues, so your token count stays fixed and each token gets worth more.

USDY from Ondo Finance is a third shape again: a yield-bearing note backed by short-duration Treasuries plus bank demand deposits, trading at a growing premium to $1.00 that represents accumulated yield, roughly 4.65 percent APY as of spring 2026 across Ethereum, Solana, Mantle, Sui and Aptos. Ondo's institutional product, OUSG, actually routes a large portion of its exposure through BUIDL itself, so the two are stacked.

Three distribution designs, one engine. Every dollar of return in all three originates as coupon or discount income on US government debt, plus repo interest.

Where the riba actually sits

A Treasury bill is a zero-coupon obligation. The government borrows, say, $980 and repays $1,000 at maturity. The $20 is not a share of any enterprise's profit and it is not rent on a leased asset. It is a fixed, contractually guaranteed increment on a sum of money lent, determined at the outset and owed regardless of what the borrower does with the funds. That is the textbook shape of riba al-nasiah, the increase stipulated on a deferred loan, which is the form the Quran addresses directly in 2:275 through 2:279, including the instruction that a repentant lender takes back his principal only, "neither wronging nor being wronged."

The repo sleeve inside BUIDL is the same thing with collateral attached. Overnight repurchase agreements are economically secured lending at a stated rate, and collateralization has never been a factor that converts interest into profit under classical fiqh.

So the on-chain layer is doing exactly what a mutual fund transfer agent's ledger does, only faster and in public. Tokenization changes custody, settlement and transferability. It does not alter the nature of the obligation. AAOIFI's Shariah Standard No. 17 on investment sukuk builds on precisely this point when it requires that sukuk certificates represent undivided ownership shares in real assets, usufruct or services rather than claims on a money debt. A token that represents a pro-rata claim on a portfolio of T-bills is a claim on a money debt no matter what chain it settles on.

The ruling, and what is doctrine versus inference

Doctrine. Separating the settled parts of this analysis from the reasoned parts makes it easier to apply. The prohibition of interest on lent money is Quranic and not subject to scholarly dispute. The application to conventional interest-bearing government and corporate bonds is also as close to consensus as modern Islamic finance gets: the OIC International Islamic Fiqh Academy addressed bonds (sanadat) in its resolution at the sixth session in 1990 and ruled that bonds carrying a stipulated interest return are prohibited, and AAOIFI's standards treat conventional bonds as impermissible instruments throughout. Money market funds whose income is interest are covered by the same reasoning. Nothing in that chain is a modern inference; it is the direct application of an explicit text to an instrument that matches its description.

Inference. Applying the ruling to a tokenized share class is where reasoning comes in, and it is unusually easy reasoning. The token is a transfer mechanism for beneficial interest in the same fund. The scholarly work on tokenization, including the Central Bank of Bahrain's 2025 stablecoin module requiring independent AAOIFI-aligned Shariah oversight, has consistently framed the question as "what is the token a claim on," never as "does the chain change the contract." Where the token represents rent, profit share or ownership of a real asset, tokenization is treated as a permissible technology. Where it represents interest income, it inherits the underlying ruling.

There is a genuine scholarly split adjacent to this that people sometimes reach for, and it does not rescue the product. Bay' al-dayn, the sale of debt to a third party at a discount, is permitted in Malaysian practice through the Shariah Advisory Council of Bank Negara and forms the basis of a large secondary market there, while AAOIFI and most Gulf and South Asian scholars prohibit discounting debt. Secondary trading of BUIDL or USTB between whitelisted holders touches that debate. But the split is about whether you may resell an already-existing debt claim, and it presumes the debt was created by a permissible transaction in the first place. A T-bill's underlying debt is interest-bearing at origination, so the Malaysian permission on debt trading does not apply. Both camps land in the same place on this specific product.

The ONDO question

Here is where the analysis stops being obvious. ONDO, the governance token, does not pay you Treasury interest. You can buy it on an exchange without KYC, it does not entitle you to the fund, and its price moves on RWA narrative rather than on the fed funds rate. Some investors reason that this makes it a bet on infrastructure rather than participation in riba.

The standard screening frameworks disagree, and for a coherent reason. Business-activity screening asks what the enterprise does, not what the instrument pays. Ondo Finance's core commercial activity is originating, distributing and managing tokenized interest-bearing debt instruments, and its revenue is overwhelmingly management and distribution fees on that flow. Under AAOIFI's screening logic, where impermissible revenue must stay below the 5 percent tolerance for incidental income, a business whose primary product line is interest-bearing paper fails at the activity stage before the ratio test ever runs. Purification exists for the sliver of impermissible income at an otherwise halal company, and it does not work as a toll you pay to hold an interest business.

The same logic applies to Securitize and to any protocol whose token value derives principally from routing Treasury yield. It also means the answer can differ across a single issuer's product line: a firm that tokenizes gold, equities and sukuk alongside Treasuries could plausibly pass a revenue screen, depending on the mix.

Where the other faith frameworks land

Christian (BRI) and Catholic (USCCB). Islamic screening is the outlier on this instrument, and neither of these frameworks screens interest at all. The Biblically Responsible Investing categories center on abortion, pornography, gambling, alcohol, tobacco and anti-family entertainment, and the USCCB socially responsible investment guidelines focus on human life, human dignity, economic justice and environmental stewardship. US Treasury exposure raises none of those flags. Some Catholic investors do raise a separate concern about federal budget allocations, but that is a conscience question rather than a screening exclusion. BUIDL and USTB pass both.

Jewish (halakhic). Ribbis is prohibited between Jews. Lending to the United States government is not a Jew-to-Jew transaction, and the standard treatment of interest from non-Jewish sovereign and corporate borrowers does not trigger the biblical prohibition. Bais HaVaad-style two-tier analysis, distinguishing biblical ribbis ketzutzah from rabbinic ribbis, and the heter iska mechanism used to restructure Jewish-counterparty lending, are aimed at a different problem. Tokenized T-bills clear.

LDS. The Church's guidance emphasizes prudence and debt avoidance, and Elder Dallin H. Oaks's 1971 warning against speculation is the reference point most often cited. Short-duration government paper is roughly the least speculative instrument in existence, so it sits comfortably. The chain it settles on does not change that.

That divergence is exactly why FaithScreener runs these as separate axes rather than one blended score, which you can see in the framework comparison.

What a Muslim investor can actually do with idle cash

Ruling something out is only useful if there is somewhere to put the money, and the alternatives fall into two groups: bank-intermediated deposits and asset-backed paper. Commodity murabaha and wakala deposits at Islamic banks are the closest functional substitute for a money market position, and several are now available to retail clients outside the Gulf. Sukuk, structured as ijara or wakala with real underlying assets, give you the fixed-income shape without the debt claim, and sovereign issues from Malaysia, Indonesia, Saudi Arabia and the UAE are accessible through Shariah-compliant fixed income funds. On-chain, the honest answer is that the halal cash-equivalent category is thin. Gold-backed tokens carry their own qabd (possession) questions, though AAOIFI Shariah Standard No. 18 recognizing constructive possession through documentary control is the doctrinal hook that most Shariah boards use when they approve them. Tokenized sukuk projects exist, including work on the HAQQ chain, but liquidity is a fraction of what BUIDL or USDY offer.

If you already hold USDY or a similar position, the treatment is disposal of the position and disposal of the accrued yield to charity without claiming it as a benefit, which is the standard remedy scholars prescribe for riba income received in error.

How FaithScreener handles this category

Tokenized RWA funds get screened on what backs the token, not on the token's ticker or chain. The crypto screening database covers 3,300-plus tokens, and instruments whose yield originates in interest-bearing debt fail the Islamic screen at the business-activity stage rather than at a ratio threshold, since there is no ratio to compute when the impermissible income is the entire product. Governance tokens for issuers in this space are screened on the issuer's revenue mix. The full logic, including how the AAOIFI 30 percent debt, 30 percent interest-bearing securities and 5 percent impermissible income thresholds get applied to token issuers that do not report like operating companies, is documented in the screening methodology.

The Bottom Line

BUIDL, USTB, OUSG and USDY are well-built, well-custodied products that fail the Islamic screen for one reason that no amount of engineering changes: every dollar they distribute originates as interest on lent money, whether it arrives as a monthly token mint (BUIDL), a rising NAV (USTB) or a growing redemption premium (USDY). Christian, Catholic, Jewish and LDS frameworks generally have no objection. The thing to remember is that tokenization is a settlement upgrade applied to an unchanged contract, so the right question about any RWA token is what the token is a claim on, and a claim on a T-bill is a claim on a loan at interest.

Treat this as educational research rather than a religious ruling or personalized investment advice, and confirm your own position with a qualified scholar or advisor before acting on it.