BlackRock Weighs Tokenized ETFs Following Bitcoin Fund Surge

BlackRock is moving deeper into tokenized funds, and the moves are starting to look like a bid to bring traditional ETFs onto blockchains.

Reports have disclosed that the firm’s tokenized money market product, known as the BlackRock USD Institutional Digital Liquidity Fund or BUIDL, is already live on the Ethereum network and works with firms such as Securitize and BNY Mellon for transfer agent and custody roles.

BlackRock Tokenized Fund Partners And Setup

According to filings and industry reports, the BUIDL fund is backed by cash, US Treasury bills, and repurchase agreements.

Transfer agent duties are being handled by Securitize while custody services are provided by BNY Mellon. Other infrastructure providers named in reports include Fireblocks, BitGo, Coinbase and Anchorage Digital.

The fund pays yields to token holders on a daily basis using blockchain rails, and it is being positioned as a bridge between classic cash-like instruments and programmable token holdings.

The Push Toward Tokenized ETFs

Executives have been quoted as saying tokenization could scale far beyond a single fund. Reports have put a potential addressable market figure as high as $10 trillion if a broad array of assets and ETFs are moved on-chain over time.

Industry trackers also show that the total value locked in tokenized real-world assets passed $10 billion in recent months, a sign that the market is no longer purely experimental.

BlackRock’s activity has prompted comparisons with other large asset managers, such as Franklin Templeton, which have also launched tokenized offerings.

Proponents say tokenized ETFs could allow fractional ownership and round-the-clock transferability, and they could speed settlement in some cases.

Reports say tokenization may also boost transparency since ownership records can be viewed directly on the chain.

At the same time, uncertainty remains over how tokenized ETF shares will interact with existing market structures such as APs and market makers, and whether on-chain trading will be treated the same as exchange trading under US securities rules.

Regulators, custodians and auditors face hard choices about legal rights, disclosure and investor protections for tokenized securities.

On the basis of sector coverage, firms continue to sort out custody architectures and legal wrappers that provide enforceable claims on the underlying assets to token holders.

Various jurisdictions might draw different conclusions, which would impede cross-border adoption or confine rollouts to individual markets.

BlackRock’s investigation into tokenized ETFs is a follow-up on the success of its Bitcoin fund, already attracting robust inflows and market interest.

The firm’s success in that department is now generating speculation that its next move will be to take pieces of its multi-trillion-dollar ETF business on-chain.

Should the transition occur, it would represent one of the biggest steps so far by a global asset manager towards investment products based on blockchain.

Featured image from Leonardo Munoz / VIEWpress, chart from TradingView