BlackRock introduces its first tokenized fund — the BlackRock USD Institutional Digital Liquidity Fund, fondly known as “BUIDL.” It will be constructed on the Ethereum network, marking BlackRock’s first foray into tokenized funds on a public blockchain. BUIDL will offer qualified investors the opportunity to earn income in US dollars.
Related: BlackRock’s iShares Bitcoin ETF Takes a Step Closer to Reality
BlackRock declares in its statement:
BUIDL promises investors some important benefits, allowing them to tokenize and trade assets on the blockchain, broadening investor access to on-chain offerings, providing instant and transparent settlements, and enabling transfers between platforms.
According to BlackRock, the initial investment minimum for the fund is $5 million. That’s quite a lofty benchmark, far higher than what was stated in the SEC report released yesterday. The Tax Exemption Notification didn’t specify the fund’s size, but it did mention that the minimum investment accepted from any external investor would be $100,000. Investor applications ranged from $1 to $100 million.
BUIDL aims to offer a stable value pegged at $1 per token and pays out daily accrued dividends directly to investors’ wallets in the form of new tokens each month. The fund invests 100% of its total assets in cash, US Treasury bills, and repurchase agreements, allowing investors to earn income by holding the token on the blockchain. Investors have the flexibility to transfer their tokens to other pre-approved investors round the clock, every day of the year. Fund participants will also have flexible storage options, allowing them to choose how to store their tokens.
BUIDL Partnerships
To build a bridge between Ethereum and traditional markets, BlackRock is engaging in Bank of New York Mellon, a global provider of investment management and investment services. BNY Mellon will serve as the fund’s asset custodian and administrator.
BlackRock is also bringing in Securitize Markets, LLC, a transfer agent registered with the SEC. As part of the deal, BlackRock made a strategic investment in Securitize, and Joseph Chalom, BlackRock’s Global Head of Strategic Ecosystem Partnerships, was appointed to Securitize’s board of directors.
Tokenizing securities could fundamentally shake up the capital markets. Today’s news shows that traditional financial products are becoming more accessible thanks to digitization.
Carlos Domingo, co-founder and CEO of Securitize
Analysts Anticipate ETH Price Surge
Following the explosive success of spot Bitcoin ETFs approved by the SEC in January, cryptocurrency market watchers have eagerly awaited approval for a similar investment tool for Ethereum. Such a development, analysts believe, could lead to an ETH price surge up to $14,000. As of writing, it’s trading at $3,519.
I see the value in Ethereum ETFs. As I’ve said, it’s just steps towards tokenization.
Fink to CNBC
However, not everyone is as optimistic. Analyst Eric Balchunas said that Ethereum spot ETFs would be “small potatoes” compared to their Bitcoin-based counterparts.
BlackRock’s Ethereum spot registration triggered an ETH price hike in November. However, the prospects for Ethereum spot ETFs were less clear. The SEC delayed its decision on BlackRock and Grayscale’s proposals for such ETFs. And while May brings a hard deadline, some experts say approval may not come – and that the delay might be for the best.
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