BlackRock, the Wall Street giant that ushered in Bitcoin ETFs earlier this year, is expanding its tokenised fund.
In a surprise, the asset management firm and Securitize, a tokenisation platform, said Wednesday that BlackRock’s USD Institutional Digital Liquidity Fund, or BUIDL, is launching on five additional blockchains: Aptos, Arbitrum, Avalanche, Optimism, and Polygon.
Ethereum has been the top choice for tokenised assets. The expansion is a vote of confidence from BlackRock in blockchains beyond Bitcoin and Ethereum.
“With these new chains we’ll start to see more investors looking to leverage the underlying technology to increase efficiencies on all the things that until now have been hard to do,” Securitize CEO Carlos Domingo said in a press release.
Tokenisation refers to creating a digital representation of an asset as a blockchain-based token. Proponents say it will help speed up the financial system, where asset transfers can take days to settle, and improve capital efficiency.
What is BUIDL?
As the crypto market swelled this year, more financial institutions started experimenting with tokenisation.
In May, JPMorgan Chase and Visa joined a project to test the feasibility of tokenising cash and other assets. Then in September, State Street, an investment firm holding $4.1 trillion in assets, inked a partnership with crypto tokenisation platform Taurus.
BlackRock’s BUIDL is a tokenised fund that invests in dollar-equivalent assets like cash, US Treasury bills, and repurchase agreements.
Shares of BUIDL are pegged to the dollar and pay daily dividends to investors’ wallets as new tokens each month.
Before now, BUIDL was only available on Ethereum, where it soared to a $517 million market value since its March launch.
A surprise move
BlackRock’s announcement is a surprise as it taps several blockchains that haven’t yet seen a lot of real-world asset tokenisation.
Colin Butler, Polygon’s head of institutional capital, previously told DL News that Ethereum is the preferred choice for asset tokenisation because it has the best security guarantees.
“If you’re not settling to Ethereum, then you’re taking a security risk that I wouldn’t recommend a firm like BlackRock take at scale,” he said.
Ethereum hosts almost $3 billion worth of tokenised assets, per tokenisation data platform rwa.xyz. Stellar, the next biggest blockchain for tokenisation, has just $387 million.
Of the new BUIDL blockchains, Arbitrum, Optimism and Polygon rely on Ethereum at least partially for their security. Aptos and Avalanche, on the other hand, are separate standalone chains.
Not all the blockchains BlackRock and Securitize have selected are being treated the same.
Those buying BUIDL on Ethereum, Arbitrum and Optimism will pay a 0.5% fee to hold the fund. The equivalent funds on Aptos, Avalanche and Polygon only charge a 0.2% fee.
According to the release, the Aptos Foundation, Avalanche, Inc. and Polygon Labs BD Investments Ltd. have each agreed to pay BlackRock a quarterly fee based on the average value of BUIDL shares on their respective blockchains.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
