BlackRock Accelerates Tokenization Plans as Wall Street Embraces Digital Assets

BlackRock’s BUIDL tokenized money-market fund has expanded to approximately $2.3 billion since launching in 2024. The asset manager is now exploring whether tokenized fund shares can be used as collateral in traditional financial markets, extending their potential applications beyond the cryptocurrency sector.

According to Dan Maley, who leads BlackRock’s cash business in Asia Pacific, the firm’s tokenized funds are already being used as collateral in digital-asset markets. The next objective is to bring this capability into Wall Street’s broader financing and margin infrastructure, where conventional money-market funds are commonly used to support trading positions.

Tokenization changes how ownership of an asset is recorded and transferred without necessarily changing the underlying investments held by the fund. Tokenized shares could move between approved investors without requiring an immediate cash redemption, potentially allowing institutions to maintain their investments while transferring ownership or pledging their holdings as collateral.

Traditional money-market funds already support trading activities by serving as collateral for initial and variation margin requirements. If financial institutions accept tokenized fund shares under similar arrangements, investors could transfer or pledge their positions without first converting them into cash, potentially making collateral management more efficient.

However, the ability to transfer tokens around the clock does not automatically mean investors can redeem the underlying fund shares at any time. Ownership transfers may take place on a blockchain, while cash redemptions remain subject to the fund’s terms, operating procedures and settlement arrangements.

For tokenized funds to gain broader acceptance in traditional finance, banks and other institutions must recognize them as eligible collateral. Existing financial infrastructure must also be capable of processing these assets, while regulators need to provide sufficient legal clarity.

The International Monetary Fund has highlighted fragmented platforms, legal uncertainty and challenges integrating tokenized financial products with existing infrastructure as major obstacles to the sector’s development. These issues determine whether tokenized assets can function across different counterparties and financial systems, rather than simply move between addresses on a blockchain.

The International Swaps and Derivatives Association has also emphasized the need for clearer industry standards covering custody and asset segregation, capital requirements, margin treatment, cross-border recognition and legal enforceability. The association’s chief executive, Scott O’Malia, has identified these areas as important considerations for bringing tokenized assets into traditional financial markets.

For institutional collateral transactions, tokenized shares must retain clear legal status as they move between counterparties, jurisdictions and established financial systems. Blockchain transfers address only part of the challenge. Institutions also need clearly defined rights and procedures for accepting, valuing, holding and returning collateral.

BUIDL’s approximately $2.3 billion in tokenized assets provides BlackRock with an established platform for developing additional institutional use cases. Although its scale could attract greater interest from financial firms, the fund’s success as collateral will ultimately depend on whether institutions are willing and able to accept it in actual transactions.

BlackRock’s initial tokenized-fund customers have largely come from cryptocurrency markets, including stablecoin holders seeking yield, according to Nikhil Sharma, a director on the firm’s digital-assets team. This early demand reflects interest in blockchain-based access to cash-like returns. Expanding into conventional finance, however, will require broader institutional participation and new operational arrangements.

The development forms part of a wider transformation in how financial institutions view tokenization. Rather than serving only as digital representations of stocks, bonds and money-market funds, tokenized assets could eventually change how financial instruments are transferred, pledged and managed across markets.

For BlackRock, tokenized funds could eventually support collateral management in traditional finance alongside their existing applications in digital-asset markets. Achieving that expansion will depend on whether banks recognize the assets, financial infrastructure can process them, and regulations establish clear rules for custody, margin requirements and cross-border transactions.

Until these requirements are addressed, tokenized fund shares will continue to serve as a collateral tool in digital-asset markets, while their wider adoption across traditional financial systems remains a developing possibility.

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