BlackRock launches first investment fund based on Ethereum blockchain

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Following the success of its iShares Bitcoin Trust (IBIT), BlackRock ventures further into the crypto universe with the launch of the “BUIDL” fund (BlackRock USD Institutional Digital Liquidity Fund, or Digital Dollar Liquidity), in collaboration with Securitize. Primarily aimed at an audience of institutional and qualified investors with an entry threshold set at $100,000, this fund will issue both shares and digital tokens (tokens) on the Ethereum blockchain. It will mainly invest in liquidities, US Treasury bonds, and “repos” (repurchase agreements), likely to generate a return.

Tokenization turns the rights of a real asset, such as real estate, gold, or shares of companies, into a digital token (token) on a blockchain. This token signifies ownership or interest in the underlying asset and can be easily traded on digital platforms, thus simplifying asset ownership and transactions.

The BUIDL fund aims for a stable value at $1 per token, with a daily dividend distribution in the form of new tokens in investors' digital wallets.

BNY Mellon will act as custodian and ensure fluidity between the digital and traditional spheres of the market. Meanwhile, Securitize will act as transfer agent and tokenization platform, overseeing the management of tokenized shares while handling registrations, redemptions, and distributions related to the fund.

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A first step towards

This launch underscores the gradual introduction of blockchain technology into traditional finance. While the fund proposes a very classic strategy of investing in liquid assets, it is the mode of ownership of its shares by investors that could disrupt industry norms and practices. It may signal a real revolution in the investment world, thanks to the disruptive potential of blockchain and tokenization.

While the fund remains for the moment reserved for professionals, the benefits of tokenization could quickly extend to more consumer-based products thanks to certain key advantages:

- Increased accessibility: tokenization democratizes investment by making costly assets accessible to a larger number of investors
- Improved liquidity, with the possibility of trading tokens 24/7
- Security and transparency ensured by the blockchain, which digitally records transactions to minimize fraud and provides long-term traceability.

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Towards the adoption of

The BlackRock « BUILD » fund perfectly symbolizes the potential of tokenization and its crucial role in the evolution of decentralized finance (DeFi). By converting real assets into digital tokens, it paves the way for a blockchain-based financial system.

However, while DeFi promises to transform the financial sector by offering services through blockchain technology without intermediaries, it also faces significant challenges. Among the main criticisms, there are security concerns related to hacking risks, volatility in the value of digital assets, the lack of adequate regulation and user protection, complexity that limits accessibility for non-experts, as well as ethical issues surrounding market manipulation. Additionally, the environmental impact of certain blockchains used by DeFi also raises concerns.

Finally, note that this is a disruptive innovation only in management and transaction processes. Nevertheless, for investors, these financial products will retain all the characteristics of current supports, both in terms of capital loss risk and potential yield.