The Boring Trade That Built Jane Street Is Coming Back On-Chain
How Jane Street's ETF playbook maps onto tokenized Treasuries, private credit, and the next market-making land grab
The year is 1999. The internet is still loading at dial-up speeds. Amazon has yet to report a profit. And in a small office near the New York Stock Exchange, four traders from Susquehanna and an IBM developer are starting something that barely makes sense on paper.
They call it Jane Street.
Back then, exchange-traded funds were not a revolution anyone was watching. The SPY — the first U.S. ETF tracking the S&P 500 — had been around since 1993, but by 2000 the entire global ETF market sat at roughly $70 billion in assets under management. That is less than 1% of what mutual funds held. To most of Wall Street, ETFs were an oddity: a hybrid structure that seemed to combine the worst of both worlds — the complexity of a mutual fund basket with the relentless volatility of a stock ticker.
Nobody understood them. Nobody built systems for them. Nobody knew how to price them when the underlying basket was moving faster than the ETF itself, or when an obscure sector ETF drifted into a 2% premium because a flood of retail buyers piled in and the authorized participants had not caught up. The established firms looked at ETFs and saw complexity without scale — a product that could not possibly justify the operational overhead.
Jane Street saw the opposite: a structural inefficiency that would only grow as the product itself grew. If you could price it better, execute faster, and manage the inventory smarter than anyone else, each trade was a near-riskless arb. And since nobody else was doing it, the spreads were wide enough to make the unit economics work even at modest volume.
The Creation-Redemption Machine
The beauty of an ETF lies in its creation-redemption mechanism — a structural arbitrage that keeps the ETF price tethered to the value of its underlying assets. When demand pushes an ETF to a premium above its net asset value, an AP can buy the basket of underlying securities, deliver them to the ETF issuer in exchange for newly created ETF shares, and sell those shares at the higher market price. When the ETF trades at a discount, they reverse the flow: buy the cheap ETF shares, redeem them for the underlying basket, and sell the individual securities.
The spread captured in each cycle was often tiny — fractions of a cent. But none of the big banks wanted to touch it. The operational complexity was absurd: you needed to price the basket in real-time, execute across multiple venues, manage settlement risk, track corporate actions on every single name, and do it all faster than anyone else. It was un-sexy, infrastructure-heavy work that required custom systems, quantitative models, and a tolerance for operating in a market so early that the rules were still being written.
Jane Street built those systems. They wrote their own tools, optimized their own compilers for latency, and developed pricing models for every ETF on the American Stock Exchange. When ETFs exploded — first into sector funds, then international, then fixed income, then smart beta, then active — Jane Street was there with the infrastructure already in place. They went from a tiny office to a firm trading tens of billions daily across 200+ venues, generating trading revenue that would peak above $30 billion in a single year.
The pattern is a familiar one in financial history: a structural innovation that the incumbents dismiss as too small, too niche, or too complicated; a small group of players who build the plumbing before anyone else; and then the wave hits. When it does, the early builders own the infrastructure, the relationships, and the economic intuition. They scale. Everyone else plays catch-up.
The Same Pattern, Twenty-Five Years Later
Tokenized real-world assets — RWAs — sit today where ETFs sat in 2000.
The numbers are strikingly parallel. By the first half of 2026, the total value locked across all tokenized assets on-chain (excluding stablecoins) had grown to roughly $31 billion, according to RWA.xyz and CoinGecko. That is up from around $6 billion at the start of 2025 — a 5x increase in sixteen months. Tokenized U.S. Treasury products alone crossed $15 billion in May 2026, with BlackRock’s BUIDL fund nearing $2.5 billion, Franklin Templeton’s BENJI at over $400 million, and Circle’s USYC becoming the single largest on-chain Treasury product at roughly $2.9 billion. On-chain private credit — loans originated off-chain and tokenized on-chain — has grown to roughly $5–6 billion in outstanding value, with protocols like Centrifuge, Maple Finance, and Goldfinch collectively financing over $3 billion. The numbers are still small compared to the $70 trillion-plus global asset management industry. But so were ETFs in 2000.
Boston Consulting Group projects that the tokenized asset market could reach $16 trillion by 2030. McKinsey offers a more conservative estimate. Even the lower end of those projections implies a market that grows by orders of magnitude — not unlike what ETFs delivered.
RWAs are not a crypto-native curiosity anymore. They are the frontier where traditional finance’s biggest structural bottlenecks — settlement delays, illiquid private markets, high minimums, fragmented clearing — meet blockchain’s native capabilities: 24/7 settlement, programmable ownership, composable collateral, global accessibility. The creation-redemption parallel for ETFs maps directly onto the mint-and-burn cycle of tokenized funds. An authorized participant delivers a $1 million T-bill to a custodian; the issuer mints a corresponding number of RWA tokens on-chain. The AP can then trade, lend, or use those tokens as collateral in DeFi protocols while the underlying Treasury earns yield. The structural arbitrage that Jane Street exploited in ETFs — pricing gaps between the instrument and its underlying — already exists in RWAs, but with fatter spreads and fewer competitors.
Where the Edges Are Today
Tokenized Treasuries and the Liquidity Stack. The most mature RWA category is also the most analogous to early ETF market making. Products like BUIDL, OUSG, BENJI, and USYC offer daily redemption windows and trade on secondary markets across Ethereum, Solana, and other chains. The spreads between on-chain price and NAV can be wider than any equivalently sized ETF because liquidity is thinner and the redemption mechanism is still manual or T+1 for many funds. For a builder, the opportunity is not just to make markets but to build the infrastructure layer that makes tight market making possible: real-time NAV oracles that price the underlying basket faster than the competition, smart-contract hooks that automate the mint-burn cycle with custodians, and settlement rails that handle the handoff between blockchain and traditional clearing. The teams that own this plumbing will capture a compounding advantage — each new tokenized fund that launches becomes another venue to trade, another data feed to optimize, another client relationship to deepen.
Private Credit and the Origination-to-On-Chain Pipeline. This is where the economic potential is largest. The global private credit market is estimated at over $2 trillion. Tokenization converts illiquid, lock-up-based loan portfolios into tokens that can be traded, used as collateral, and tracked transparently. The structural friction today is enormous: due diligence, legal documentation, custody, compliance. For market makers and liquidity providers, the arbitrage opportunity lives in the gap between the yield earned on the underlying private credit pool (often 8–15%) and the yield required by token holders in secondary markets. A firm that can price the risk of a pool of fintech receivables better than the market can earn a persistent structural edge — just as Jane Street earned an edge pricing ETFs against their baskets. For builders, the hard work is upstream: building the origination pipeline that produces clean, audit-ready pools; standardizing the legal wrappers; connecting on-chain capital to off-chain loan origination systems. The protocols that solve these integration problems — and there are not many yet — will be the ones that attract both institutional supply and DeFi demand.
On-Chain Collateral and The DeFi Flywheel. Tokenized Treasuries are increasingly used as collateral in DeFi lending markets. Aave Horizon, Morpho, and Spark are all actively integrating RWA collateral. This creates a hybrid arbitrage opportunity: borrow stablecoins against tokenized T-bill collateral at one rate, deploy the stablecoins into higher-yielding strategies, and capture the spread. The entire loop is programmable, which means automation can shrink it to milliseconds. The infrastructure to do this at scale — oracles for fair-value pricing of tokenized funds, liquidation engines that work across traditional and on-chain settlement, multi-chain bridges for collateral mobility — is still being built. The teams building it now are the ones writing the standardized AP agreement for a market that does not yet exist in final form. For investors, the opportunity is subtler: tokenized Treasuries offer a crypto-native way to earn risk-free-ish yield — currently 3–5% — that can sit in a wallet, be used as collateral, and be moved between protocols without banking hours. That simple composability unlocks strategies that are impossible with a traditional money market fund.
Custody, Compliance, and the Regulatory Bridge. The single biggest unlock for RWA market making will be regulatory clarity. The U.S. has made meaningful progress in 2026, with the SEC, CFTC, and various state-level frameworks moving toward definitions that accommodate tokenized securities. The European Union’s MiCA framework is already live. Singapore, the UAE, and Hong Kong have all established regulatory sandboxes. The players who invest early in compliance infrastructure — KYC/AML integrations between on-chain identity and off-chain custodians, legal frameworks for cross-jurisdictional token transfers, tax reporting for tokenized fund flows — are not sexy. But they own the bottleneck. Every AP in the ETF ecosystem needs a prime broker, a custodian, and a legal team. The RWA equivalent is not yet standardized. The protocols and service providers that build these bridges — connecting TradFi custody rails like BNY Mellon or State Street to on-chain transfer agents, or building wallet infrastructure that satisfies both SEC custody rules and smart-contract composability — will capture structural rents for a long time.
Cross-Chain Liquidity and Settlement. This is the RWA equivalent of Jane Street trading across 200+ venues. A tokenized Treasury fund may trade on Ethereum at one price and on Solana or Avalanche at another. The bridging costs today are high, the settlement times are slower than pure on-chain transfers, and the risk of bridge hacks is real. But infrastructure for cross-chain atomic settlement is improving rapidly — projects building intent-based bridging, canonical bridges for institutional-grade assets, and settlement layers that abstract away the underlying chain entirely. The firms that build the fastest, safest cross-chain market-making engines will capture the same multi-venue edge that defined Jane Street’s dominance. For market makers, this is the most directly analogous opportunity to 1999-era ETF arb — except the venues are blockchains instead of exchanges.
Issuer and Platform Economics. For the protocols and platforms that issue tokenized assets, the long-term opportunity resembles the ETF issuer business. Once an issuer — BlackRock, Franklin Templeton, Ondo, or a newer entrant — establishes a tokenized fund with meaningful AUM, switching costs are meaningful. Integrations get built around that fund’s specific contract address. DeFi protocols write liquidations engines calibrated to that fund’s redemption schedule. Custodians build workflows for that fund’s compliance rules. The early issuers that reach escape velocity create moats that are hard to cross. For crypto-native protocols like Centrifuge or Ondo, the question is whether they can retain their first-mover position once traditional asset managers fully enter the space. For a builder, the window to integrate deeply with these growing protocols is open now, before the integration patterns harden.
Who Is Playing
The cast of characters is telling. BlackRock — the world’s largest asset manager, with over $11 trillion in AUM — launched BUIDL in 2024 and has since expanded it to nine blockchains. Franklin Templeton runs its BENJI fund on Ethereum and Stellar. JPMorgan operates Kinexys (formerly Onyx), a blockchain platform that has processed over $1 trillion in repo transactions and now handles tokenized money market funds on Ethereum. Ondo Finance has built a bridge between tokenized Treasuries and DeFi, with its OUSG and USDY products serving as the primary on-chain collateral for multiple lending protocols. Figure Technologies has originated over $1 billion in HELOCs per month on its Provenance blockchain and operates what it calls the On-chain Public Equity Network (OPEN). Centrifuge, backed by Coinbase, provides the tokenization infrastructure for institutional funds. Together, these are not fringe experiments — they are the largest names in global finance placing active bets.
The pattern is unmistakable: when the largest asset manager, the largest bank, the largest ETF issuer, and a cohort of crypto-native protocols all converge on the same infrastructure thesis, the market is past the pilot phase.
What History Suggests
ETFs went from $70 billion in 2000 to over $1 trillion by 2010, $7 trillion by 2020, and beyond $20 trillion today. The CAGR from 2008 onward was over 20% — a multi-decade compounder that turned early infrastructure bettors into the dominant firms in global markets. Jane Street, Citadel Securities, and Optiver all grew into their current scale largely because they built for ETFs before the wave hit.
Tokenization follows a similar structural logic: it reduces friction in markets with the deepest inefficiencies — private credit, real estate, fund distribution, cross-border settlement. Each of those verticals is measured in trillions. A technology that reduces settlement time from T+2 to instant, or makes a $100 million private credit pool as tradable as a stock, does not just improve existing markets. It creates new ones.
The risks are real and should not be papered over. Smart contract vulnerabilities remain a concern — a single exploit on a major RWA bridge could set adoption back a year. Regulatory fragmentation across jurisdictions creates uncertainty for issuers and market makers who need to operate across borders. Redemption delays are an open issue: some tokenized funds advertise daily redemptions but execute them off-chain with a manual review step, creating a gap between the promise of instant settlement and the reality of operational friction. And the base layer is still volatile — a sustained crypto bear market would dry up a significant portion of the demand side, even if the underlying assets remain sound.
But these are the same kinds of risks that surrounded ETFs in their early years: uncertainty about how the creation-redemption mechanism would hold up under stress, questions about whether index-tracking would ever replace active management at scale, fears that a liquidity crisis would expose structural flaws in the ETF wrapper. Each time, the market adapted. The infrastructure hardened. The products grew.
The Window Is Open
The analogy is not perfect. ETFs were a distribution innovation wrapped in a regulatory vehicle. RWAs are an infrastructure innovation wrapped in a technology stack. The regulatory path for RWAs is murkier, the technology is newer, and the market is far more fragmented. But the structural similarity — a product with built-in creation-redemption arbitrage, serving an enormous latent demand, operating in a market where the infrastructure is being built in real-time by a small group of early movers — is close enough to be instructive.
Twenty-five years from now, we may look back at the mid-2020s as the moment when a handful of firms built the rails for a market that went from $30 billion toward tens of trillions. The firms that understood the analogy — that saw tokenized RWAs not as a crypto fad but as a structural market evolution, the way Jane Street saw ETFs — stand a strong chance of being the ones who built the infrastructure, wrote the playbooks, and captured the compound advantage.
A close reading of the ETF precedent, the institutional momentum visible today, and the economic logic underpinning tokenization all point in the same direction — but analogies are directional, not deterministic. Every structural shift carries forks where adoption stalls, regulation bifurcates, or a better technology emerges. What made Jane Street’s bet work was not just that they were right about ETFs, but that they were early, they were relentless about infrastructure, and they kept compounding their edge across market cycles.
The question that matters for anyone reading this — builder, investor, market maker, institution — is the same one the Jane Street founders asked themselves in 1999: if this product is going to be bigger than anyone thinks, what should I be building today? Not everyone who answers that question will win. But the ones who do not ask it at all have already decided their outcome.