BlackRock Pushes BUIDL as Derivative Collateral in Crypto Market

The largest asset management firm in the world, BlackRock, is set to deepen its engagement in the digital asset market after the successful rollout of spot Bitcoin and Ethereum ETFs in 2024. In a fresh initiative, the American investment giant is striving to promote the use of its money-market token BUIDL as a collateral asset within the cryptocurrency derivatives market.

BlackRock’s BUIDL Aims to Function as Collateral for Derivatives: Report

As per a recent report by Bloomberg, BlackRock has commenced efforts to position BUIDL as a collateral asset in the crypto derivatives market. To clarify, BUIDL – which signifies BlackRock USD Institutional Digital Liquidity Fund – is a tokenized fund based on the Ethereum blockchain that provides institutional investors avenues for earning US dollar yields.

Like stablecoins, BUIDL is linked to a fixed value of $1 per unit and invests in assets such as US dollars, US treasury bills, and repurchase agreements. Since its launch in March, BUIDL has seen impressive growth, accumulating $550 million in assets under management (AUM) to become the foremost tokenized fund available in the marketplace.

To further propel the growth of BUIDL, Bloomberg reports that BlackRock, alongside its broker Securitize, has initiated discussions with major exchanges like Binance, OKX, and Deribit to potentially introduce the money-market token as a collateral asset for derivative trading on their platforms.

BlackRock plans to impose a management fee of 0.5% for traders, consistent with its existing standard policy. However, the use of BUIDL is restricted to eligible institutional investors, each required to have a minimum investment of $5 million.

At present, crypto prime brokers such as FalconX and Hidden Road have authorized select clients to utilize BUIDL as collateral for trading. Nonetheless, entering the derivatives markets of major exchanges like Binance and OKX could significantly amplify the market impact of the tokenized fund.

BlackRock Set to Compete with USDT in Derivative Trading

With the launch of BUIDL into crypto derivative trading, BlackRock is poised to face strong competition from Tether’s USDT, which is currently the predominant collateral asset in the crypto derivatives landscape. USDT is the largest stablecoin globally and the third-most valuable cryptocurrency with a market capitalization of $120 billion.

Currently, there have been no confirmed statements from BlackRock or the mentioned crypto exchanges regarding plans to introduce BUIDL for crypto derivative trading. However, successful implementation of this initiative would mark yet another significant achievement in BlackRock’s digital asset strategy.

BlackRock presently manages the largest spot Bitcoin and Ethereum ETFs, boasting respective net assets of $25.79 billion and $1.26 billion according to data from SoSoValue. By securing a collateral asset in the crypto derivatives market, which generated nearly three-quarters of crypto trading volume in September, BlackRock could broaden its influence in the digital asset sector.