BlackRock’s New Tokenized Fund Brings TradFi, Crypto Closer: Bernstein

The launch of the BUIDL fund is significant because of the way in which the investment manager has brought in key ecosystem partners from both the TradFi world and the crypto sector, the report said.

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Updated Mar 26, 2024 at 12:28 p.m. UTC
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  • BlackRock last week unveiled its first tokenized fund on a public blockchain.
  • The investment manager has involved key institutions from both the TradFi world and the crypto sector.
  • On-chain funds could be a new category of growth for asset managers, Bernstein said.

The launch of BlackRock’s (BLK) first tokenized fund on a public blockchain is significant because of the way in which the asset manager has brought in key ecosystem partners from both the TradFi world and the crypto sector, broker Bernstein wrote in a research report on Tuesday.

As part of a growing trend of digitizing mutual funds and securities on the blockchain, the investment giant last week officially unveiled its first tokenized fund on the Ethereum network,

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  • Bernstein notes that while tokenized money market funds are not new, the launch of the BlackRock USD Institutional Liquidity Fund (BUIDL) is significant in the way the investment manager has “brought in key ecosystem partners from both the traditional world and the crypto world.”

    “This would facilitate interoperability between both sides and would comfort more traditional customers to adopt on-chain funds, without major friction points,” analysts Gautam Chhugani and Mahika Sapra wrote.

    The fund is represented by the blockchain-based BUIDL token, and is fully backed by cash, U.S. Treasury bills, and repurchase agreements, BlackRock said.

    The investment manager said Securitize will act as a transfer agent and tokenization platform, while TradFi institution BNY Mellon is the custodian of the fund. Anchorage Digital Bank NA, BitGo, Coinbase, and Fireblocks will also participate in the fund’s ecosystem.

    This is the first major test case for institutional holders to experience the benefits of 24/7 instant settlements on a blockchain, with increased transparency and capital efficiency, and at a lower cost, the authors wrote.

    The decision to use Ethereum as the public blockchain instead of using a private blockchain “allows for a wider design space for interoperability and programmability,” the report said, adding that tokenized fund redemption could occur on-chain with stablecoin integration.

    On-chain funds could develop into a new category of growth for asset managers, and “crypto asset management could evolve from simple crypto accumulation via exchange-traded fund (ETF) products, to building on-chain multi-asset products with its own distribution and unit economics,” the report added.

    Read more: Brevan Howard-Backed Tokenization Firm Libre Goes Live

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