BlackRock Reportedly Pushes Its Money-Market Digital Token to Be Used as Collateral in Cryptocurrency Derivatives Trading

Asset manager BlackRock is reportedly pushing its money-market digital token to be used as collateral in cryptocurrency derivatives trading.

Asset management giant BlackRock is reportedly pushing its money-market digital token to be used as collateral in cryptocurrency derivatives trading.

According to a Bloomberg report on Oct. 18, the company is holding talks to integrate its BlackRock USD Institutional Digital Liquidity Fund (BUIDL) token with the trading systems of major crypto exchanges including Binance, OKX and Deribit.

Securitize, a brokerage firm, is said to be a partner in the initiative, which could expand BUIDL’s use as collateral, increasing competition with stablecoins.

Derivatives, financial contracts that derive their value from another asset, such as stocks or cryptocurrencies, are heavily traded in the crypto market. Traders use derivatives to bet on asset price changes or protect against losing money, while collateral is used as security for these trades to ensure losses can be covered.

According to CCData, derivatives, such as futures and options, made up over 70% of the total crypto trading volume in September, with about $3 trillion in crypto derivatives contracts traded on centralized exchanges.

BUIDL is already accepted as collateral by FalconX and Hidden Road, two of the largest crypto brokers. The token has a minimum investment of $5 million and is only available to qualified institutional investors.

According to data from Security Token Market, BUIDL’s market capitalization was $547.7 million as of Oct. 18, making it one of the largest use cases for assets tokenization on blockchain. The fund primarily invests in U.S. Treasurties, cash and other liquid assets, and Bank of New York (BNY) handles the interoperability of transactions between digital and traditional markets.

On Oct. 3, a subcommittee of the Commodity Futures Trading Commission (CFTC) voted in favor of recommending a proposal that would allow digital assets to be used as collateral for commodities and derivatives trading. The decision could receive final approval by the end of the year, marking a significant step in the integration of traditional and crypto markets.

The move would allow brokers to use tokens, such as BUIDL, stablecoins and other cryptocurrencies, in traditional markets through embedded systems.

Speaking to Bloomberg, Deribit CEO Luuk Strijers said the platform is “reviewing” a number of tokens as collateral, including BUIIDL. Franklin Templeton’s OnChain U.S. Government Money Fund (FOBXX) is another popular tokenized money market fund backed on Wall Street.

According to data on Dune Analytics, the market capitalization of tokenized securities is $1.7 billion at the time of this snapshot.

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