BlackRock Seeks To Push BUIDL As Derivative Collateral In Crypto Market – Details

The world’s largest asset manager, BlackRock, aims to expand its foray in the digital asset industry following the successful launch of spot Bitcoin and Ethereum ETFs in 2024. In a new venture, the American asset manager is attempting to push the adoption of its money-market token BUIDL as a collateral asset in the crypto derivative market.

According to a Friday report by Bloomberg, BlackRock has begun marketing BUIDL as collateral in the crypto derivative market. For context, BUIDL – which stands for BlackRock USD Institutional Digital Liquidity Fund – is a tokenized fund issued on the Ethereum blockchain offering institutional investors access to achieving US dollar yields.

Similar to stablecoins, BUIDL is pegged to a stable value of $1 per unit and invests in assets such as US dollars, US treasury bills, and repurchase agreements. Following its launch in March, BUIDL has experienced remarkable growth amassing $550 million in AUM to become the largest tokenized fund in the market. 

In order to facilitate further growth of BUIDL, Bloomberg states that BlackRock in conjunction with its broker Securitize has begun discussions with major exchanges such as Binance, OKX, and Deribit to introduce the money-market token as a collateral asset for derivative trading on their respective platforms. 

BlackRock will aim to charge traders a management fee of 0.5% in line with its current standard policy. However, the use of BUIDL is only restricted to eligible institutional investors with a minimum investment quota of $5 million.

Currently, crypto prime brokers such as FalconX and Hidden Road have already authorized their customers to use BUIDL as a collateral asset for trading. However, a potential entry into the derivatives market of powerhouse exchanges such as Binance and OKX presents a significant opportunity to exponentially increase the market influence of the tokenized find.

In launching BUIDL in the crypto derivative trading, BlackRock will experience powerful opposition from Tether’s USDT which ranks as the most common asset for collateral in the crypto derivative market. USDT is the world’s largest stablecoin and third-largest cryptocurrency with a market cap of $120 billion. 

At present, there are no confirmative comments from BlackRock or the mentioned crypto exchanges on any planned introduction of BUIDL in crypto derivative trading. However, the successful execution of this initiative would represent another outstanding milestone in the investment firm’s digital asset campaign.

BlackRock already presents the largest spot Bitcoin and Ethereum ETFs with respective net assets of $25.79 billion and $1.26 billion according to data from SoSoValue. By securing a collateral asset in the crypto derivative market, which produced nearly three-quarters of crypto trading volume in September, BlackRock could expand its reach in the digital asset industry.