BlackRock’s Tokenized Fund Draws $240 Million Since Debut

(Bloomberg) — BlackRock Inc.’s money-market fund that records share ownership on the Ethereum blockchain has attracted more than $240 million since its debut a week ago.

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The BlackRock USD Institutional Digital Liquidity Fund invests in cash, US Treasury bills and repurchase agreements. Holders of the fund receive a cryptocurrency called BUIDL that is valued at $1 per token. Digital wallets approved by Securitize, BlackRock’s partner for the investment vehicle, can transfer the tokens to other validated addresses.

BlackRock has been among the biggest advocates of crypto among mainstream financial firms, with Chairman and CEO Larry Fink saying that every financial asset will eventually be tokenized. The company’s iShares Bitcoin Trust has attracted more than $13 billion in inflows since the exchange-traded fund was launched in January.

The tokenized fund serves three main use cases, according to Carlos Domingo, founder and chief executive officer of Securitize. It is aimed at crypto companies seeking to manage their treasuries on blockchains, and this includes decentralized autonomous organizations, or DAOs. Secondly, for crypto projects focused on creating derivatives of Treasury bills, the fund can be a foundational asset for developing these products, he said. Lastly, the product serves an an alternative to stablecoins, and can be used as collateral for borrowing and trading.

“It’s very institutional, it is managed by the largest asset manager in the world,” said Domingo. “There’s no counterparty risk to any crypto company.”

Crypto startup Ondo Finance has invested a total amount of $95 million in BlackRock’s BUIDL, Ondo’s founder Nathan Allman told Bloomberg News. Franklin Templeton launched the first US-registered tokenized money-market fund in 2021 and had about $324 million in assets at the end of February. But BENJI, the token that represents shares of the Franklin Templeton’s fund, are not transferable between fund investors.

Securitize Markets is an alternative trading system registered under the US Securities and Exchange Commission and has a broker-dealer license under the Financial Industry Regulatory Authority. Its affiliated company is a registered transfer agent with the SEC, which allows its clients to transfer the tokens between each other, Domingo said. However, he noted that the SEC has not issued any guidance about whether a firm has to use a private blockchain or public blockchain for tokenization.

The SEC has recently intensified its scrutiny of Ether, the native token of the Ethereum. The BlackRock fund uses the network to process transactions. Domingo said the investigations, which will take a while, should be separate from the blockchain itself.

“Whether it’s a security versus public Ethereum as an infrastructure, those are two different things in my opinion,” he said. “The public Ethereum blockchain is a battle-tested infrastructure that is very good for the type of activities we perform.”

(Updates the fund amount to reflect the investment of Ondo Finance, and comments from the crypto startup in the sixth paragraph.)