BlackRock’s treasury fund, BUIDL, has experienced rapid growth since its inception and has now surpassed the $500 million mark. BUIDL was developed on March 15 and now leads other treasury funds by market capitalization. DeFi protocols like Mountain Protocol and Ondo Finance bolstered the fund’s growth using BUIDL as backing for their tokens.
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According to Etherscan, BUIDL’s market cap currently tops $502.81 million. The fund is less than four months old but has achieved a major milestone by crossing the half-billion mark. BUIDL is an acronym that stands for BlackRock USD Institutional Digital Liquidity Fund.
The fund claimed the top position just six weeks after launch, surpassing the Franklin OnChain U.S. Government Money Fund (BENJI). BUIDL has maintained its leading position ever since.
DeFi protocols fuel BUIDL’s recent success
We are proud to announce that Mountain Protocol has incorporated @BlackRock's BUIDL fund, tokenized by @Securitize, as part of the USDM Reserves.
Working with crypto forward products and institutions to make USDM the best stablecoin for users. pic.twitter.com/lEr9ei8ZZU
— Mountain Protocol | USDM (@MountainUSDM) June 27, 2024
The price of BUIDL is pegged to the U.S. dollar on a ratio of 1:1. Investors earn daily dividends distributed monthly through Securitize, a real-world tokenization platform. BlackRock partnered with Securitize to facilitate the dividend distribution process.
BUIDL’s recent success is partly due to other decentralized finance (DeFi) protocols, such as Ondo Finance and Mountain Protocol. These two DeFi protocols use BUIDL as a backing asset for their tokens.
Mountain Protocol holds a significant amount that it uses as a backing asset for its permissionless yield-generating stablecoin, USDM. The protocol announced that it had incorporated the BUIDL fund as a portion of USDM reserves.
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Ondo Finance is currently the largest BUIDL holder, with $173.7 million backing its OUSG token. Crypto brokers such as Hidden Road and FalconX also use BUIDL to collateralize assets for institutional investors in their ecosystems.
According to Dune Analytics data from Crypto Koryo, 75% of tokenized treasury funds are based on the Ethereum blockchain. Stellar comes in second place, commanding a market share of 23.9%.
Larry Fink explains why BlackRock campaigns for asset tokenization
Early this year, BlackRock chairman and CEO Larry Fink said that the investment firm believes the tokenization of financial assets is the next technological transformation. The CEO explained that the firm sees tokenization’s main advantage as being the ability to customize strategies that align independently with investors.
“We believe the next step going forward will be the tokenization of financial assets, and that means every stock, every bond will have its own basic QIB. They will be on one ledger. The most important thing, we can customize strategies through tokenization that fit every individual.”
-Larry Fink
Overall, the tokenized treasury market has grown significantly. Data from rwa.xyz suggests that the market surged to $1.81 billion on June 8 from $780 million in January.
This analysis goes in tandem with a joint report released by Boston Consulting Group and the Global Finance Markets Association (GFMA). The report suggests the tokenized illiquid asset market is greatly undervalued and could skyrocket to $16 trillion before 2030.
Cryptopolitan reporting by Collins J. Okoth