BlackRock is launching a first tokenization project on the Ethereum blockchain. In partnership with the US firm Securitize, the asset manager is tokenizing an "Institutional Digital Liquidity" fund, starting with an initial liquidity of 100 million USD coin (USDC).
After launching a spot-based Bitcoin ETF, BlackRock is taking the next step in the blockchain industry while the approval for a spot Ether ETF is still pending. CEO Larry Fink sees significant potential in so-called tokenization. This involves the representation of traditional assets also known as Real-World Assets (RWAs) on the blockchain. The first approach by the institution is taking place on the Ethereum blockchain, according to a filing with the US Securities and Exchange Commission (SEC).
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The BlackRock USD Institutional Digital Liquidity Fund (BUIDL)
Little is known about the fund. The fund application only mentions its name, whose acronym is a common reference to the word "build" in the crypto space. Analyzing the blockchain data, a connection with the Ethereum addresses of the issuer and the company Securitize was revealed. Five days ago, a new wallet minted 100 million USD coin (USDC) via Circle. Some test transactions then led to the fund's smart contract.
Next to many test transfers, two subscriptions to the fund are visible. In total, the smart contract created 40 million BUIDL tokens. At this point, the value of one share is unknown. The minting of 100 million USDC is likely the seed investment. According to the SEC filing, BUIDL is a pooled investment fund with a minimum subscription of $100,000. Judging by the name, it will likely be a money market fund.
Larry Fink excited about tokenization
Shortly after the approval in mid-January, BlackRock CEO Larry Fink said in an interview with CNBC that the Spot Bitcoin and Ether ETFs are just "the first step in the technological revolution in financial markets. The second step will be the tokenization of all financial assets. The technology is already available, as is evident by the launch of BlackRock's fund on the Ethereum blockchain.
"I really think we are moving in that direction. We have the technology to do tokenization today. If you have a tokenized security, [...] the moment you buy or sell an instrument, you know it's in a ledger that everyone created together [...]. A tokenized system eliminates any corruption." - Larry Fink, CEO of BlackRock
Similarly, he sees cryptocurrencies as much more of a new asset class than alternative money. A realisation he made only two years ago. Ultimately, Bitcoin can provide protection in uncertain times and covers a similar use case that gold has dominated for thousands of years, according to Fink.
