BUIDL has accumulated $3.75 billion in assets, accounting for nearly 30% of the tokenized US Treasury market.

By Erik Lowe, Head of Content at Pantera Capital

Translated by 0xjs@Golden Finance

So far, cryptocurrencies, especially DeFi, have mainly operated within their own world. The primitives that have been built are essentially focused on meeting the needs of token holders within the DeFi ecosystem. For example, DEX primarily supports the exchange of governance, utility, or gas tokens for other similar tokens. Lending protocols allow users to borrow tokens using other tokens as collateral. There is a lot of activity, but most of it still remains within the "crypto world". This raises a question: "How and when will this technology break into the world outside of blockchain?"

The answer may be earlier than we imagine. In fact, the "crypto world" and the "real world" are merging.

Global asset management companies integrate DeFi

Since announcing the launch of a spot Bitcoin ETF last year, BlackRock has been making waves in the digital asset space. They recently launched the first fund called BUIDL (The BlackRock USD Institutional Digital Liquidity Fund), represented in the form of Ethereum tokens and backed by US Treasury bonds.

BUIDL aims to provide a stable value of $1 per token and to directly pay daily accrued dividends as new tokens to investors' wallets each month. The fund will invest 100% of its total assets in cash, US Treasury bonds, and repurchase agreements, allowing investors to earn returns while holding blockchain tokens. Investors can transfer their tokens to other pre-approved investors 24/7/365. Fund participants will also have flexible custody options, allowing them to choose how to hold the tokens.

Since its launch on March 21, BUIDL has accumulated $3.75 billion in assets, accounting for nearly 30% of the tokenized US Treasury market. This growth has been largely driven by Pantera's portfolio company Ondo, which contributed $140 million to the fund through its on-chain short-term US Treasury bond fund.

BlackRock and Franklin Templeton are leading the tokenized US Treasury market, bringing real-world assets (RWA) to the forefront and center. The world of centralized finance is merging with decentralized finance.

We believe the next step will be the tokenization of financial assets. This means that every stock, every bond will essentially have its own CUSIP. They will be recorded on a general ledger. Every investor will have their own identity number.

We can eliminate all the issues related to illegal activities with bonds and stocks through tokenization. But most importantly, we can customize tokenization strategies to suit everyone…

We believe this is a technological revolution for financial assets.

— Larry Fink, CEO of BlackRock, Bloomberg TV interview, January 12, 2024

The practical benefits of tokenization cannot be ignored, which is why we believe more traditional enterprises will follow suit. Benefits include 24/7/365 liquidity, instant trade settlement, and reduced operational friction, features that are rarely achieved in traditional systems. This is not only a technological upgrade for financial operations, but also a strategic expansion that may ultimately enhance financial inclusiveness and deepen the market.

BlackRock's BUIDL fund may promote broader integration between TradFi and DeFi. Ultimately, the distinction between traditional finance and decentralized finance may become increasingly blurred.

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