BlackRock’s BUIDL tokenized money-market fund has grown to around $2.3 billion since its 2024 launch, as the asset management giant considers expanding the use of tokenized fund shares as collateral in traditional financial markets. The move could bring blockchain-based financial products deeper into Wall Street’s lending, trading and margin systems.
Dan Maley, head of BlackRock’s cash business in Asia Pacific, said the firm’s tokenized funds are already being used as collateral in digital-asset markets. BlackRock is now exploring how to extend that functionality into conventional finance, where money-market funds regularly support trading positions and margin obligations.
Tokenization allows ownership of fund shares to be recorded and transferred digitally without changing the underlying assets held by the fund. Tokenized shares could move between eligible investors without requiring an immediate redemption into cash, enabling institutions to transfer ownership or pledge their holdings while keeping their investments in place.
Money-market funds already serve as collateral for trading activities, including initial and variation margin. If tokenized shares become eligible for the same purposes, financial institutions could pledge or transfer fund interests without first redeeming them. This could streamline collateral management and reduce delays when assets need to be moved between transactions.
However, continuous token transfers do not necessarily mean continuous access to cash redemptions. Although ownership may change hands on a blockchain at any time, investors must still follow the fund’s redemption terms and operating procedures.
Regulatory Barriers Could Slow Wider Adoption
Expanding tokenized funds into traditional finance will require banks and other financial institutions to recognize them as acceptable collateral. Existing market infrastructure must also support these instruments, while regulators need to provide legal certainty around their treatment.
The International Monetary Fund has highlighted fragmented platforms, regulatory uncertainty and integration challenges as obstacles to the growth of tokenized finance. These issues affect whether digital assets can function across multiple institutions and financial systems, rather than simply being transferred on a blockchain.
The International Swaps and Derivatives Association has similarly called attention to questions surrounding custody, asset segregation, capital requirements, margin rules, cross-border recognition and legal enforceability. Chief Executive Scott O’Malia has identified these areas as important issues that must be addressed before tokenized assets can achieve broader use in conventional markets.
For institutional investors, tokenized shares must retain clear legal standing when transferred between counterparties and jurisdictions. Blockchain technology can facilitate the transfer itself, but financial institutions also need established procedures for accepting, valuing, holding and returning collateral.
BUIDL Positions BlackRock for Further Tokenization Growth
With approximately $2.3 billion in tokenized assets, BUIDL gives BlackRock an established foundation for exploring additional financial applications. Its existing scale could encourage more institutions to consider tokenized fund shares, although broader adoption will depend on whether banks and other market participants accept them in real-world transactions.
Early demand has primarily come from crypto-market participants, including stablecoin holders seeking yield, according to Nikhil Sharma, a director on BlackRock’s digital-assets team. Moving beyond this customer base will require new institutional relationships, compatible systems and operational frameworks designed for traditional financial markets.
The initiative reflects a broader evolution in asset tokenization. Financial institutions are increasingly examining whether blockchain-based representations of stocks, bonds and money-market funds can do more than digitize ownership records and instead improve how assets are transferred, pledged and managed.
For BlackRock, tokenized funds could eventually serve both cryptocurrency markets and traditional collateral operations. However, widespread adoption will depend on institutional acceptance, infrastructure compatibility and clear rules governing custody, margin requirements and cross-border transactions.
Until those conditions are met, tokenized fund shares will remain an established collateral option in digital-asset markets, with their broader integration into traditional finance still under development.
