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BlackRock has officially launched its tokenized asset fund on the Ethereum network and has made a strategic investment in asset tokenization company Securitize. The fund is named BlackRock USD Institutional Digital Liquidity Fund and is represented by blockchain-based BUIDL tokens. It is fully backed by cash, US Treasury bonds, and repurchase agreements, and will distribute daily returns to token holders via the blockchain. Securitize will serve as the transfer agent and tokenization platform, while BNY Mellon will be the custodian of the fund's assets.
BlackRock CEO, the man who pushed BTC onto an ETF
BlackRock is really making waves. Just over two months after the Bitcoin spot ETF was approved, bringing crypto assets into traditional finance, they've turned around and brought traditional financial assets into crypto.
How will certain places that claim to be "embracing crypto" and building "policy havens" react? (I'm talking about HK.) These places are just intermediaries themselves, with no financial markets of their own, dragging their feet with policy and following others.
In the future of accelerating crypto-driven financial globalization, they might be in for a rude awakening.
The rest of this article is mainly based on my friend's tweets, who is very knowledgeable about RWA. You can check out the original tweets on Twitter when you have time:
BlackRock clearly wants to make a move in the public chain tokenization field. The fund is named BUIDL, which is pretty cool (BlackRock USD Institutional Digital Liquidity Fund, each word's first letter). Previously, the BTC spot ETF was essentially Web3 assets sold to Web2 through Web2, while this time it's Web2 assets sold to Web3 through Web3 (and Web2). Similar to the various compliance and technical processes polished by the BTC spot ETF, these products need to consider both the Web2 and Web3 systems. The minimum subscription amount for this product is 5M, targeting qualified investors, with 1 BUIDL = 1 USD maintained. It adopts a daily rebase mechanism to distribute interest (keeping the token price consistent while increasing the token quantity), and the tokens only circulate on a whitelist. The structure is as shown below, with securitization being the key focus. Securitize Markets holds an ATS (alternative trading system) license in the United States and is a Finra broker-dealer; Securitize LLC is also an SEC-registered Transfer Agent, with the system deployed on the public chain. This is similar to what @DigiFTTech achieved in Singapore with the Capital Market Service and Recognized Market Operator licenses, using the public chain as the underlying technology for primary market issuance and secondary market trading.
As a fund management company, BlackRock will need to find such institutions to help them tokenize. Other institutions such as BNY Mellon Bank handle traditional asset custody, while BitGo and others in the ecosystem support custody and distribution of such assets.
Compared to various RWA assets before, the highlight of this fund is real-time subscription and redemption, which is also a point that traditional institutions like BlackRock are very eager to achieve. In the Web3 world, where everyone earns ten points of interest on AAVE, and transactions are real-time, this is the most attractive aspect of public chain technology for financial institutions - real-time settlement. However, in traditional channels, due to the lack of unified ledgers among institutions, clearing and settlement are required, involving various external institutions and internal processes. As long as the entire chain gets longer, T+2, 3, or even T+5 are all normal occurrences.
Traditional fund trading process
It claims to achieve real-time subscription and redemption, but it still encounters friction and delays in clearing and settlement due to traditional and fiat systems. There are too many bottlenecks and prerequisites in between. Although I haven't tested it, I have some guesses, and I'd like to communicate with everyone about the current situation and unresolved issues in traditional channels:
- 1. Securitize supports USDC and USD subscription and redemption, similar to the DigiFT platform. If users choose USDC for subscription, they still need to exchange it through Circle (currently Circle only has a Customer bank). Unless Securitize and BlackRock both have accounts at the same bank or there is a real-time interbank transfer network, real-time completion is not possible.
- 2. If users choose USD, they also need to deposit it into the Securitize platform, and if it's not the same bank, there will be delays and costs for interbank transfers. If the bank transfer between Securitize and BlackRock is in the same bank, real-time transactions can be achieved.
- 3. Subscription achieves real-time transactions, as BlackRock can mint new fund shares in real-time, but it takes time to invest USD to purchase underlying assets, somewhat similar to STETH, which dilutes the overall APR. However, for large redemptions, if they exceed the cash held in the BlackRock fund, it will require the sale of underlying assets, which will take longer. However, as the largest asset manager, BlackRock can provide ample liquidity.
Currently, there are 40M BUIDL tokens in circulation, held by two addresses, with 35M and 5M BUIDL respectively. BlackRock requires a minimum subscription amount of 5M, which few Web3 institutions can participate in. Observing on-chain behavior, there have been no instances of USDC subscriptions, with purchasers mostly being traditional institutions.
In fact, from the perspective of the above process, it's only the tokenization of fund shares, while other processes are actually off-chain. (Still the first step) Achieving real-time transactions is only possible because BlackRock can mint new shares in real-time through Securitize subscriptions, and there is still integration between the two parties mentioned above. Redemption depends on BlackRock's own liquidity arrangements. The entire structure is basically traditional institutions working through various pre-funded schemes, automated system integrations, and extensive negotiations and collaborations to barely achieve "real time"; compared to Web3, although Web2 has a larger scale, achieving this functionality requires tremendous effort and ten years of work to complete transactions with a wave of the hand in Web3.
But no matter how complex the middle layer is, this is a very good attempt, a big step in the integration of Web2 and Web3, and the specific scale that can be achieved is not really important. The key is the push from different participants in the entire infrastructure layer during this process, further exploring the ability to integrate traditional channels and emerging infrastructures. In the future, as more assets enter Web3, especially more assets issued directly on the chain, and with more stablecoins, especially bank stablecoins or even CBDCs on the chain, the ability to conduct token-to-token transactions and exchanges directly in the Web3 world, that's the true change of the financial world by Web3. |
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Post time 29-3-2024 14:45:18