BlackRock has launched its USD Institutional Digital Liquidity Fund (BUIDL) on the Avalanche blockchain through digital asset firm Securitize, marking a significant move in the tokenization of traditional financial assets. The $510 million fund, which represents one BUIDL token per share, targets a stable value of $1 per token and distributes daily dividends directly to investors' digital wallets. The fund invests exclusively in cash, U.S. Treasury bills, and repurchase agreements.
This expansion makes BUIDL the largest tokenized treasury fund globally. The fund requires a minimum investment of $5 million and operates under SEC regulation 506(c), maintaining exemption from investment company status through Section 3(c)(7) of the Investment Company Act. John Wu, President at Ava Labs, noted that tokenization could enhance market access and utility. The fund offers features distinct from traditional financial instruments, including instant settlement, peer-to-peer transfers, and improved collateral mobility.
The launch follows several institutional initiatives on Avalanche, including projects by J.P. Morgan, Citi, Wellington, KKR, and Franklin Templeton. The network's appeal stems from its technical capabilities, including EVM compatibility, rapid transaction completion, and low fees.
Carlos Domingo, CEO of Securitize, emphasized the company's ongoing partnership with Avalanche in tokenizing real-world assets. Notably, BlackRock maintains a strategic investment in Securitize, with Joseph Chalom, BlackRock's Global Head of Strategic Ecosystem Partnerships, serving on Securitize's board.
The fund structure includes compensation arrangements between the Investment Manager and Securitize Markets, consisting of an upfront fee and quarterly payments based on the average daily net asset value of investors introduced through Securitize Markets. While the fund aims for a stable $1 value per token, investments carry risks including regulatory uncertainty, market adoption challenges, and potential price volatility. The blockchain-based nature of these tokens presents additional considerations compared to traditional assets.
This development represents a continuing trend of traditional financial institutions exploring blockchain technology for asset tokenization, though success will depend on market adoption and regulatory clarity in the evolving digital asset landscape.
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