BlackRock is seeking to have its digital money-market token, BUIDL, recognized as collateral for cryptocurrency derivatives trades.
Sources familiar with the negotiations report that the firm is ‘in talks’ with prominent crypto exchanges such as Binance, OKX, and Deribit regarding this possibility, as noted by Bloomberg.
BUIDL is tailored for qualified institutional investors, requiring a minimum investment of $5 million. It serves as a digital counterpart to BlackRock’s USD Institutional Digital Liquidity Fund, which is a money-market fund investing in U.S. Treasury bills, cash, and other safe instruments.
Unlike traditional stablecoins such as Tether’s USDT (USDT), BUIDL offers interest to its holders, potentially making it appealing to derivatives traders.
Is BlackRock aiming to dominate the stablecoin and derivatives sectors?
Crypto derivatives are financial agreements that derive their value from fluctuations in cryptocurrency prices. Traders utilize these contracts to speculate on the value of assets like Bitcoin (BTC) without the need to purchase them directly. In order to engage in trading, participants often must provide collateral, typically in the form of stablecoins. Tether’s USDT is a popular choice in this capacity, as it maintains a stable value of $1, ensuring reliability for securing trades.
However, the introduction of BUIDL into this arena could pose a challenge to USDT’s market supremacy. BlackRock is optimistic that additional platforms will recognize BUIDL as a valid form of collateral, significantly widening its market footprint, according to Bloomberg.
Prime brokers FalconX and Hidden Road have already permitted their clients to utilize BUIDL as collateral, and custodian Komainu recently joined this group. These initial adopters consist of hedge funds and other institutional investors.
In September, crypto derivatives trading represented over 70% of total crypto trading volume, with an astonishing $3 trillion in contracts traded that month, as reported by research firm CCData.
This substantial volume emphasizes the importance of derivatives within the crypto ecosystem. If BUIDL is accepted by major exchanges like Binance and Deribit, it could establish BlackRock as a key player in this market.
