BlackRock Leads Charge in Tokenized Asset Revolution

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Tokenized real-world assets (RWAs) have been gaining traction among financial institutions, with major players like BlackRock joining the trend by introducing their own tokenized assets. Utilizing blockchain technology, these assets can be issued, managed, and distributed more efficiently than their traditional off-chain counterparts, particularly in the realms of private and alternative investments.

Since 2018, Security Token Market has been monitoring this space, tracking over 600 tokenized products and observing various trends and performances. Notable among these is the BlackRock USD Institutional Digital Liquidity Fund ($BUIDL), which has been drawing attention as institutions increasingly deploy tokenized money market funds. By June 2024, BUIDL experienced a 5.93% increase in net inflows, concluding the month with $483,311,326.32 in assets under management.

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Why is this on-chain effort worthwhile? One key benefit is the utility it provides. Issued on the Ethereum public blockchain through Securitize, this token has been employed as collateral on prime brokerage FalconX to secure loans and collateralize derivatives positions.

In the realm of venture capital, Mike Reed from Franklin Templeton provided an anecdote at TokenizeThis 2024, where a venture capitalist expressed a desire to utilize their tokenized money market fund ($BENJI) to finance portfolio companies. By sending a yield-generating asset to a company’s treasury directly, the firm can monitor the usage of funds through blockchain transparency.

Further examples demonstrate cost savings and utility through both proofs of concept and real-world applications. Among these:

  • Broadridge has reported saving $1 million for every 100,000 repo transactions.
  • JPMorgan’s Onyx, through Project Guardian, managed to reduce the rebalancing process of portfolios from 3,000 steps to just a few clicks, achieving 18% annual cash drag reduction via smart contracts.
  • Figure has tokenized over $7 billion in HELOCs, saving 150 basis points in the process, benefitting both the issuer and the end investor.
  • Hashnote’s USYC product aims to collaborate with Broadridge to access the intraday market (mainly for banks), to enhance yields and subsequently pass these benefits to customers.

Security Token Market’s June 2024 report shows a hypothetical security token bundle of all STM-tracked RWAs outperformed the CoinDesk 20 Index, closing the month at +13.73% versus the index’s -11.74%. The decline in the crypto market can be partly attributed to broader macroeconomic conditions, such as the expectation of fewer interest rate cuts.

Additionally, the outflows in spot bitcoin ETFs have fostered negative sentiment in the crypto space, impacting the prices of bitcoin and other cryptocurrencies in the CoinDesk 20. The STM Team continues to evaluate performance by asset class, providing detailed insights in their latest research report.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.