After the ETFs, the tokenized funds are the next major innovation in the financial industry

Larry Fink, the historic CEO of Blackrock, never ceases to say, who wants to hear it, that the next major innovation in the financial industry will be The tokenization of financial assets.

Since the start of the marketing of its BlackRock USD Institutional Digital Liquidity Fund Fund (BUIDL) on March 20, 2024, we can say with certainty that the largest asset manager in the world has officially become the ambassador of the Real World Assets Movement (RWA), namely The transposition of real world financial assets on a public blockchain.

We will try to understand together the reasons which push this investment fund, whose power and influence are regularly compared to those of a state, to adopt the Blockchain technology to market its financial products.

🏠 To understand everything-what are RWAs and why are they going to change everything?

The emergence of Real World Assets (RWA) as a fundraiser

You can say that when the ” Fourth Branch of the United States government “, As Bloomberg likes to nickname Blackrock, offers financial innovation, it quickly becomes the standard.

This innovation is based on a movement called Real World Assets, or RWA. In other words, the transposition of active active worlds on a public blockchain including the Boston Consulting Group (BCG) estimates the market at $ 600 billion by 2030 in a recent report.

⛓️ What is the blockchain and how does it work?

Indeed, BlackRock makes the bet that the financial assets of the real world (actions, bonds, etc.) will be found on the blockchain because of the many advantages that this technology confers, and a real need to which its use brings a solution. Indeed, the tokenization of financial assets offers several advantages at the time of their marketing:

• Better accessibility : Investors can more easily access assets previously reserved for large financial institutions;
• Increased availability : Financial products are accessible 24 hours a day, 7 days a week in real time;
• An improvement in liquidity : Tokenized assets can be exchanged more quickly which facilitates its resale;
• More transparency and safety : Recording transactions on a blockchain guarantees better traceability and limits the risk of fraud;
• Reduction of marketing costs : By removing certain intermediaries, tokenization reduces transaction and administration costs.

The use of blockchain is seen by BlackRock as a differentiating element allowing it to make its products more attractive, to capture market share, to appear as the most innovative institutional, and to become a major player in “this third revolution in active management”.

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What is BlackRock's tokenized fund and how does it work?

Now try to understand how the BlackRock tokenized fund works. BUIDL is a tokenized regulated fund on Ethereum public blockchain. Its objective is simple: to offer investors a product backed by stable and regulated treasury bills, while exploiting the advantages of blockchain.

The minimum investment ticket required for the Buidl fund is $ 5 million, making it a product reserved for institutional investors. The latter benefit from the great flexibility of the token since it is available 24 hours a day and 7 days a week and does not depend on the opening or closing the market for this or that time zone.

Once collected, the funds are invested by the financial vehicle in American treasury bills and liquidity with a return target of around 4 %. These assets guarantee low volatility and optimal security. In exchange for his investment, the investor receives Buidl Tokens representing his shares of the fund.

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The parity of the Buidl Token with the dollar is one for one, that is to say that a Buidl Token is equal to a dollar. These tokens can circulate on the blockchain, be exchanged or integrated into decentralized finance strategies (DEFI). The distribution of yields is monthly, and is done in Buidl Tokens minted for the occasion directly on the Wallet of the subscribers.

Blackrock's goal is here to launch a call product designed to test demand and assess the blockchain -related efficiency gains. At the same time, it is a way to set foot in the ecosystem and to register as the referent company of RWA as are Strategy (formerly Microstrategy) for Bitcoin or Coinbase for centralized exchanges (CEX).

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Immediate success and a strong signal sent to the market

The launch of the Buidl fund in March 2024 exceeds all expectations. In just one week, the fund attracts more than $ 245 million, which places Blackrock among the leaders in the asset tokenization market. Today the capitalization of the fund exceeds one billion dollars, with the vast majority of its liquidity on Ethereum.

Evolution of the capitalization of the Buidl fund over 12 months (by blockchain)

The main subscribers of the fund are Ondo Finance, which uses it as the underlying of its token Ousg, Ethena and its stablecoin USDTB which is 90 % backed by Buidl and Frax Finance which made BUIDL the main guarantee of Stablecoin Frxusd. With regard to the success that the product meets, BlackRock has decided to extend its offer to 6 major blockchain networks: Aptos, Arbitrum, Avalanche, Optimism, Solana and Polygon.

Why such a success? The latter is mainly based on BlackRock's credibility and the image conveyed by the largest world asset manager who inspires confidence. The reason for this success is also based on the stability of underlying assets that are American treasury bills which ensure a safe yield in a regulated framework. Finally, it is the deployment of Buidl on the Ethereum public blockchain which explains its performance, in particular because the latter allows fluid integration with the DEFI ecosystem.

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A conglomerate of partner companies that will not stop at Money Market Funds (MMF)

As we have seen, the success of the marketing of the BUIDL is indisputable, especially since Franklin Templeton had launched in 2021 a tokenized monetary fund without meeting the same success – the latter is also today capitalized at $ 631 million, much less than BlackRock if we consider its seniority. Behind the success of the Buidl fund hides a conglomerate of partner companies.

We indeed find in this panel of companies at the forefront of the tokenization of funds: Securitize, Bank of New York Mellon, Digital Anchorage, Bitgo, Coinbase and Fireblocks. The message is clear, these companies wish to actively participate in the tokenization movement of assets by converting shares, bonds or real estate funds into blockchainized products. They have just done it on a tokenized monetary fund, and will not stop there, let's be sure.

A new era emerges. An era in which Real World Asset is the condition sine qua no the development of the finance of tomorrow. An era in which the multiplication of tokenization initiatives obliges the regulator to set up a clear legal framework for these new financial instruments. Donald Trump’s election will likely endow this trend of funds to which American companies are prepared.

💡The Rwa and investment accessible to all: realistic or utopian promise?

Blackrock is already considering a second season for the Buidl. Blackrock is currently chatting with Binance, OKX and Derebit to make the tokenized fund a guarantee of derivative products. These platforms would be added to the list of brokers who already use Buidl as collateral such as Falconx or Hidden Road.

Conclusion : “ The first which will grasp the wave could reach a disproportionate market share and define the cannons of future standard. »»

This quote from McKinsey about the tokenization of active worlds is heavy with meaning.

With BlackRock Buidl, digital active ingredients are no longer a marginal phenomenon. They are now integrated into institutional finance.

If the story of Blackrock teaches us one thing, it is because when it engages in a path, it structures and imposes it. Buidl could well be the first milestone of a fully tokenized finance and dominated by “these financiers who direct the world”, I named BlackRock.

As an entrepreneur specializing in the tokenization of assets and financial innovations, I focus on deciphering the challenges of digital finance and blockchain. With an experience in strategic management and the analysis of economic dynamics, I put a point of honor to make new web trends accessible. Through my contributions on cryptoast, my goal is to bring an enlightened and structured look at the evolution of tokenization, stablecoins and financial innovations, in order to inform and support readers in this transformation.

Aurélien Roussel

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