In a revolutionary decision that has the potential to restructure the financial sector, BlackRock, the biggest asset manager in the world, launched the first tokenized fund ever with its shares issued on the Ethereum public blockchain. The name given to this innovative product is “BlackRock USD Institutional Digital Liquidity Fund” (BUIDL). BUIDL provides qualified investors with the opportunity to earn U.S. dollar yields by subscribing to the Fund through Securitize Markets, LLC.
The announcement, released on March 22, 2024, is regarded as a critical milestone in the digital assets’ strategy by Robert Mitchnick, the Head of Digital Assets at BlackRock. “This is the most recent step in our digital assets strategy,” Mitchnick said. “We are committed to designing solutions in the digital assets space, which offer real-world problem solutions to our clients, and we are thrilled to work with Securitize.
Through tokenization, the process of converting traditional assets into tokens on a blockchain, BlackRock continues to explore the digital asset space. By tokenizing BUIDL, the Fund will present investors with several advantages, such as ownership issuance and trading on a blockchain, direct access and expansion of investors to on-chain offerings, instantaneous and transparent settlement, and the ability to easily transfer tokens across networks.
In collaboration with industry leaders such as BNY Mellon, BlackRock aims to enable interoperability for the Fund between digital and traditional markets, bridging the gap between the two worlds. BUIDL seeks to achieve a stable value of $1 per token, paying daily accrued dividends directly to investors’ wallets as new tokens every month.
The Fund’s investment strategy is straightforward: it 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. Investors can facilitate the transfer of their tokens to other pre-approved investors 24/7/365, which demonstrates the flexibility and accessibility provided by blockchain technology.
To ensure a robust and secure ecosystem, BlackRock has assembled a group of industry powerhouses, including Anchorage Digital Bank NA, BitGo, Coinbase, and Fireblocks, among other market participants and infrastructure providers in the crypto industry. BlackRock Financial Management will handle fund management, while the Bank of New York Mellon will serve as the custodian of the Fund’s assets and its administrator.
Securitize, the designated platform for the tokenization of the Fund, will be responsible for the fund’s transfer agency duties, managing the distribution and redemption of the tokenized shares, as well as investor subscriptions, and reporting on the fund’s distribution and redemption requests. Securitize Markets will also serve as the placement agent, making the Fund available to eligible investors.
As a testament to BlackRock’s commitment to the digital asset space, the firm has also made a strategic investment in Securitize, further solidifying the partnership. Joseph Chalom, BlackRock’s Global Head of Strategic Ecosystem Partnerships, has joined Securitize’s Board of Directors, establishing a closer tie between the two companies that will help further both.
BlackRock’s recently announced blockchain-powered BUIDL fund, with an initial investment minimum of $5 million and compliant with Rule 506(c) of the Securities Act of 1933 and Section 3(c)(7) of the Investment Company Act, represents a significant milestone in the adoption of blockchain technology in the financial sector.