BlackRock’s Tokenized Fund Brings Legitimacy: Bernstein

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BlackRock’s planned tokenized fund launch will bring legitimacy to public blockchains such as Ethereum, according to analysts at research and brokerage firm Bernstein. 

BlackRock, the world’s largest asset manager, recently announced its first tokenized fund, the USD Institutional Digital Liquidity Fund. 

BlackRock’s Fund Brings Legitimacy To Blockchains 

BlackRock’s first tokenized fund runs on the Ethereum blockchain. According to analysts at Bernstein, BlackRock’s latest move brings legitimacy to public blockchains such as Ethereum. According to analysts Gautam Chhugani and Mahika Sapra, BlackRock’s decision to use a public blockchain, such as Ethereum, instead of private chains like JPMorgan’s Onyx broadens interoperability and programmability in a space that has largely been viewed as retail casinos. 

The report added that BlackRock’s move could encourage more traditional institutional customers to adopt on-chain funds. 

“Tokenised fund redemption could be on-chain with stablecoins (e.g., USDC) integration. New asset classes (bonds, equities, fx stablecoins) could lead to interoperability between asset classes on-chain and scope for further programmability based on deal contract conditions. The plumbing built for retail speculation starts to drive institutional utility.”

BlackRock’s Tokenized Fund 

BlackRock announced plans for a tokenized money market fund in partnership with financial services firm Securitize and is looking to deepen its foray into digital assets following the launch of its spot Bitcoin ETF in January. According to a filing made with the United States Securities and Exchange Commission, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) is a liquid fund that invests in US Treasury Bills, repurchase agreements, and cash. However, BlackRock has not yet provided a launch date for the fund. 

Securitize would be the tokenization platform and the transfer and placement agent. Ecosystem partners include Anchorage, Coinbase, BitGo, and Fireblocks, who would facilitate the custody and settlement of digital assets. BNY Mellon will be responsible for interoperability with traditional markets by custodying the fund’s assets. 

The BUIDL Token 

According to data from Etherscan, a token called BUIDL was created on the Ethereum blockchain. It currently has a maximum supply of 100 but only one token holder. The token is designed to offer a stable value of $1 per token and pay qualified investors dividends in the form of tokens representing the US Dollar yield. 

“Tokenization can be seen as the next evolution of financial markets, similar to the ETF wave of the last 2 decades.”

Impact On The Crypto Ecosystem 

The analysts stated that while tokenized funds are nothing new, BlackRock bringing in partners from both traditional and crypto ecosystems would help encourage traditional institutional customers to adopt on-chain funds with reduced friction. 

“This would act as the first major test case for institutional holders to experience 24*7 instant settlement benefits of the blockchain with increased transparency and improved capital efficiency at reduced operating costs. For an institutional holder using liquid funds as margin/collateral, there are significant benefits to counter-parties with increased transparency and capital efficiency from instant settlement.”

Tokenized funds could also become a new growth category for asset managers, and their participation could evolve from simple investments via ETFs to the building of on-chain products as a source of commercial revenue and cost-saving opportunity.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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