BlackRock, BUIDL, and the Mass Adoption of Blockchain Technology

The launch of the first spot Bitcoin (BTC) exchange-traded funds (ETFs) on the U.S. market was a historic event for the cryptocurrency ecosystem as it ushered in a new era of institutional access and set records in inflows and trading volumes for new ETF launches. 

It took more than a decade for the first ETF to be approved, and it was indeed a momentous occasion, but a more significant event happened shortly after that marks the beginning of the transformation of the global financial system: BlackRock launched the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), the asset managers first on-chain fund. 

Here’s a closer look at BUIDL, how it has performed since its launch, and what the fund means for the cryptocurrency ecosystem and global financial system in the years to come. 

BUIDL is a tokenized fund launched on the Ethereum (ETH) blockchain. The purpose of the fund is to provide qualified investors with the opportunity to earn U.S. dollar yields by purchasing tokens that keep a stable value of $1 and pay daily accrued dividends directly to investors' wallets as new tokens each month. 

To pay the yields, the fund invests 100% of its total assets in cash, U.S. Treasury bills, and repurchase agreements, allowing investors to earn yield while holding the token on the blockchain. The tokens can be transferred 24/7/365 to other pre-approved investors, and fund participants will also have flexible custody options that allow them to choose how to hold their tokens.

The initial ecosystem participants in BUIDL include Anchorage Digital Bank NA, BitGo, Coinbase, and Fireblocks, among other market participants and infrastructure providers in the crypto industry.

There is an initial investment minimum of $5 million to invest BUIDL, which ensures that the fund caters to entities or individuals with significant capital who are looking for stable and secure investment opportunities within the digital assets space​. 

Just as it was with the spot Bitcoin ETFs, flows into BUIDL have gotten off to a strong start as data from Etherscan shows that as of April 3, more than $280 million has been invested in the fund. The fund launched on March 20, which means it took 16 days, including weekends, for the assets under management to reach that level. 

And it didn’t take long for the first signs of how the fund is set to transform both tradicitional and decentralized finance (DeFi) to show as BUIDL received a $92 million investment in Ondo Short-Term US Government Treasuries from the tokenized real-world asset platform Ondo Finance.

Data provided by the Real World Asset platform shows that at the time of writing (April 4), BUIDL ranks second after Franklin Templeton’s Franklin OnChain U.S. Government Money Fund, which currently has a market capitalization of $360.2 million. 

According to BlackRock CEO Larry Fink, “the next generation for markets, the next generation for securities, will be tokenization of securities."

Fink added that tokenization will provide “instantaneous settlement” and “reduced fees,” and said that despite these advantages, the development of this type of technology wouldn’t disrupt BlackRock’s business model. A further explanation of the advantages of RWA tokenization can be found in our explainer article HERE.

As noted above, BUIDL was not the first fund to be launched by a respected asset manager as Franklin Templeton launched their fund previously, but didn’t receive the same level of acknowledgement. It probably has something to do with the fact that BlackRock is the largest asset manager in the world, so its name carries a little more weight. 

This truth is also reflected in the ETF market as BlackRocks iShares Bitcoin Trust (IBIT) has recorded inflows of $14.316 billion at the time of writing, the highest level of inflows for all the ETFs, while Franklin Templon’s Franklin Bitcoin ETF (EZBC) has taken in $280 million. 

It was also the filing of BlackRock’s IBIT application with the Securities and Exchange Commission (SEC) that really kicked off the ETF driven rally for Bitcoin and the broader crypto market in June of 2023, which adds further support to the impact that BlackRock is having in increasing interest in digital assets. 

“The fund’s focus on ‘institutional digital liquidity’ suggests that BlackRock sees a bigger role for blockchain technology in the massive $26 trillion US Treasuries market,” said Jeff Owens, co-founder of Haven1. “This could pave the way for innovative applications of blockchain in areas like settlement, record-keeping, and even potential new financial instruments.”

"We are likely to see more and more institutions vying for a piece of the tokenization pie,” he added. “Many banking and investment giants, like JPMorgan, Citi, and Franklin Templeton, are already experimenting with RWA tokenization. However, competition is fierce, and institutions may focus on developing unique on-chain products within their own niches.”

Simply stated, the launch of BUIDL is helping to catalyze the mass adoption of on-chain finance, because once institutions commit capital, mass adoption typically follows. 

At SOMA.finance, we have long held the belief that the future of global finance would be built on blockchain technology, which is why we launched our platform with the ability to tokenize stocks and other assets you already own. 

With the largest asset managers and banks in the world now exploring RWA tokenization and other applications of the technology, its only a matter of time before the trend spreads, and soon enough, its possible that all markets will operate on-chain. 

If you want to get in the trend ahead of the crowd, and not be limited by the need for accredited investor status, sign-up with SOMA.finance now and start your journey towards a tokenized future.