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Ahmed Barakat
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BlackRock BUIDL tokenization on a tokenized money-market fund has grown to about US$2.3 billion since its 2024 launch, while the asset manager explores whether tokenized fund shares can serve as collateral in traditional finance, beyond crypto markets.
BlackRock’s tokenized funds are already being used as collateral in digital-asset markets, according to Dan Maley, who oversees the firm’s cash business in Asia Pacific. The proposed next step is to connect that existing use to Wall Street’s broader financing and margin systems, where conventional money-market funds already support trading positions.
Tokenization changes the rails on which ownership moves, rather than what a money-market fund holds. Shares represented as tokens could pass between approved investors without a cash redemption first, potentially letting institutions keep money invested while transferring ownership or pledging a position.
Traditional money-market funds already serve as collateral for trading positions, including initial and variation margin. If tokenized shares can be accepted within those arrangements, institutions could transfer or post fund interests without first redeeming them into cash, potentially reducing friction when reallocating collateral.
But round-the-clock transfers do not mean round-the-clock cash redemptions. The operational gap is still material: ownership may move on-chain while the fund’s redemption process remains governed by its own terms and operating arrangements.
For traditional-finance use, banks and other institutions would need to accept the instruments as collateral, existing market infrastructure would need to accommodate them, and regulation would need to provide sufficient legal certainty.
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Legal Certainty and Market Plumbing
The International Monetary Fund has identified fragmented platforms, legal uncertainty and difficulties connecting tokenized finance to existing infrastructure as problems for the sector. Those constraints affect whether a token can operate across counterparties and systems, not simply whether it can be transferred on its originating blockchain.
The International Swaps and Derivatives Association has also identified custody and segregation frameworks, capital and margin treatment, cross-border recognition and legal certainty as issues requiring industry standards and regulatory clarity. Scott O’Malia, the association’s chief executive, described those areas as necessary to address for tokenized assets to cross into traditional finance.
For institutional collateral, the practical test is whether a tokenized share retains clear legal treatment when it moves between parties, jurisdictions, and existing systems. A successful transfer on-chain solves only one part of that process; counterparties also need defined rights and operating procedures when collateral is posted, valued or returned.
| Area | Current position | Requirement for broader use |
| Digital-asset markets | BlackRock tokenized funds are already used as collateral | Wider participation by traditional institutions |
| Transfers | Fund tokens can move between approved investors around the clock | Integration with existing market infrastructure |
| Legal and operational treatment | Standards and clarity remain necessary | Rules for custody, margin, capital and cross-border recognition |
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BlackRock BUIDL’s Scale Meets a Different Tokenization Test
BUIDL’s US$2.3 billion tokenization scale gives BlackRock an established product around which to develop tokenized-fund use cases. Scale can attract institutional attention, but collateral utility ultimately depends on acceptance by the firms that hold, manage and receive assets in financial transactions.
Early users largely came from crypto markets, including stablecoin holders seeking yield, according to Nikhil Sharma, a director on BlackRock’s digital-assets team. The initial customer base therefore reflects an on-chain demand for cash-like yield; expansion into conventional markets would require a different network of counterparties and operating arrangements.
This transition is part of a broader shift in how tokenized assets are being considered: not only as digital representations of stocks, bonds or money-market funds, but as instruments that could alter how assets move through financial markets.
For BlackRock, tokenized funds may eventually support collateral workflows as well as crypto-market activity, provided that institutional systems can recognize and process them.
The near-term focus is on the acceptance layer: bank recognition, infrastructure compatibility, and rules governing custody, margin, and cross-border treatment. Until those pieces are in place, tokenized fund shares remain a live collateral tool in digital-asset markets and a proposed extension into traditional finance.
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