How did BlackRock, the world's largest asset management company, enter the RWA orbit?
BlackRock has been actively involved in RWA’s work
Lead investment in tokenized asset issuance platform Securitization.
In May this year, asset tokenization platform Securitize successfully raised $47 million in strategic financing, with BlackRock as the lead investor. Joseph Chalom, BlackRock’s global head of strategic partnerships, was appointed to the board of directors.
To date, the Securities Itize platform has issued 13 tokenized funds covering asset classes such as U.S. government bonds, private equity, venture capital and cryptocurrencies, with a total asset value of more than $600 million.
Joseph Chalom, BlackRock’s global head of strategic ecosystem partnerships, said in a press release from Securitize that BlackRock sees the potential for tokenization to revolutionize capital markets infrastructure and that their investment forms part of BlackRock’s broader move to upgrade its digital asset strategy.
Securitization Introduction
Securitize is a leader in the tokenization of physical assets, driving the compliant digitization of financial assets through advanced blockchain technology. The company and its affiliates operate as certified broker-dealers (part of SIPC), overseeing initial markets and alternative trading systems (ATS). In addition, they are SEC-registered transfer agents responsible for maintaining official records of changes in securities ownership.
Issuing Token Fund
BlackRock launched its first tokenized fund on the Ethereum chain, called the BlackRock USD Institutional Digital Liquidity Fund (BU DL). The fund invests in underlying physical assets such as the U.S. dollar, U.S. government bonds, and repurchase agreements, providing eligible subscribers with BU DDL tokens worth $1 each. In addition, it distributes real asset income to the addresses of token holders every month.
The minimum investment for the BUIDL fund is $5 million, and BUIDL tokens can only be subscribed and transferred after the KYC process. The fund is designed for institutional users and emphasizes compliance, asset security and transparency (both on-chain and physical assets). BUIDL is currently the largest tokenized fund, managing more than $380 million in assets and growing nearly 30% per month.
BUIDL's operational structure and partners:
Securitization: Tokenization Platform
BlackRock: Fund Management (responsible for investment)
Bank of New York Mellon: Underlying Asset Custody
Anchorage Digital Bank, BitGo, Coinbase, Firewall: Crypto Asset Custody Services
PwC: Fund Audit
Circle: Establish a BUIDL/USDC trading pool to meet instant settlement needs.
ON DO: USG introduces BUIDL tokens as the underlying asset (to achieve instant settlement of USG).
The state of tokenized assets
Fiat stablecoins are the main category of RWAs, accounting for a dominant market share of 96%. Six of the top ten asset tokenization initiatives belong to this category. Well-known issuers such as Tether and Circle use US dollars to mint stablecoins to meet the requirements of cryptocurrency transactions and payments. However, stablecoin holders cannot benefit from the returns of the underlying assets. This type of asset is easily affected by the volatility of the cryptocurrency market.
On the other hand, tokenization of government bonds distributes bond proceeds to token holders. This approach brings stable real-world asset returns to the blockchain, leveraging blockchain's instant settlement and high transparency. This model creates a native interest-bearing stable coin or asset.
Currently, government bonds are the second largest category of tokenized assets. With an annual growth rate of 155%, it shows great potential for future development. Projects such as Secure, Ondo, and Franklin Templeton, which are backed by various traditional institutions, have high compliance, increasing the possibility of them receiving a large amount of funds from traditional finance.
Treasury Tokenization
Currently, the cumulative market value of symbolic government bonds is approximately US$1.45 billion, with an average annual return of 4.96%.
It is worth noting that the BU DDL fund supervised by BlackRock has successfully accumulated more than US$470 million in a little over two months, surpassing the AUM of the Franklin Intermodal U.S. Government Bond Fund (FOBXX) launched in 2021.
To further strengthen the potential of decentralized finance (DeFi) for government bonds, the third largest fund OUSG (managed by Ondo) converted part of its underlying assets from BlackRock’s SHV Short-Term Treasury ETF (iShares Short-Term Treasury ETF) to BU DDL tokens, allowing continuous subscription and redemption 24 hours a day.
What is the development potential of RWA tokenization?
There are four key advantages to asset tokenization:
Increase trading liquidity
Improve efficiency and reduce transaction costs
High transparency of tokenized assets
Expanding market reach
Market growth forecast
Citigroup predicts that by 2030, the global tokenized asset size will reach 3-4T USD and the transaction volume will reach 1T USD. They believe that applications such as central bank digital currency (CBDC), games and social media will drive the mass adoption of cryptocurrencies. Asset tokenization is seen as the killer application of blockchain, with 80 times the potential growth space.
The returns of real-world assets are not affected by the volatility of the cryptocurrency market, providing a more stable source of income for on-chain financing. Investments from traditional institutions such as BlackRock and Franklin, as well as the efforts of startups such as Ondo and Securitize, indicate that the regulatory and asset conversion mechanisms within and outside the blockchain are becoming increasingly mature. It can be expected that RWA tokenization will be a long-term narrative that transcends bull and bear markets.