BlackRock’s BUIDL tokenized money-market fund has reached approximately $2.3 billion since its launch in 2024, as the asset manager explores expanding the use of tokenized fund shares as collateral in traditional financial markets. The initiative could extend the technology beyond cryptocurrency trading and into Wall Street’s established financing systems.
Dan Maley, who oversees BlackRock’s cash business in Asia Pacific, said the firm’s tokenized funds are already being used as collateral in digital-asset markets. The next step is to explore their integration into conventional financial markets, where money-market funds are widely used to support trading positions and margin requirements.
Tokenization changes how ownership of fund shares is recorded and transferred, rather than altering the assets held by the fund itself. Tokenized shares could move between approved investors without requiring an immediate cash redemption, allowing institutions to retain their investments while transferring ownership or pledging their holdings as collateral.
Money-market funds already play an important role in traditional finance by supporting initial and variation margin requirements. If tokenized shares receive similar recognition, institutions could pledge or transfer their fund interests without first redeeming them for cash. This could simplify collateral transfers and reduce operational delays when firms need to reallocate assets.
However, the ability to transfer tokens at any time does not guarantee that investors can redeem their holdings for cash around the clock. Blockchain-based ownership transfers may operate continuously, while redemptions remain subject to the fund’s terms and established operating procedures.
Regulatory and Infrastructure Challenges Remain
For tokenized fund shares to become widely accepted in traditional finance, banks and other financial institutions must recognize them as eligible collateral. Existing market infrastructure must also support their processing, while regulators need to establish clear legal frameworks for their use.
The International Monetary Fund has identified fragmented platforms, legal uncertainty and difficulties integrating tokenized products with existing financial infrastructure as significant barriers to broader adoption. These challenges determine whether tokenized assets can operate across different institutions and systems, rather than merely move between blockchain addresses.
The International Swaps and Derivatives Association has also highlighted the need for industry standards and regulatory clarity covering custody, asset segregation, capital requirements, margin treatment, cross-border recognition and legal enforceability. Its chief executive, Scott O’Malia, has identified these issues as important hurdles for tokenized assets entering conventional financial markets.
For institutional collateral transactions, tokenized fund shares must maintain clear legal status as they move between counterparties, jurisdictions and financial systems. A successful blockchain transfer alone is insufficient. Institutions also need established procedures defining how collateral is accepted, valued, held and returned.
BlackRock’s BUIDL Fund Could Expand Tokenized Collateral Use
BUIDL’s approximately $2.3 billion in tokenized assets gives BlackRock an established product for developing additional institutional applications. Its scale may attract further interest from financial firms, although broader collateral adoption will depend on whether banks, brokers and other market participants are prepared to accept the fund in actual transactions.
BlackRock’s early tokenized-fund users have largely come from cryptocurrency markets, including stablecoin holders looking for yield, according to Nikhil Sharma, a director on the firm’s digital-assets team. This initial demand reflects interest in blockchain-based access to cash-like returns. Expanding into traditional finance will require a broader network of institutional counterparties and compatible operating arrangements.
The development reflects a wider shift in how financial institutions view tokenization. Beyond representing stocks, bonds and money-market funds digitally, the technology could change how financial assets are transferred, pledged and managed across markets.
For BlackRock, tokenized funds could eventually support collateral operations in traditional finance as well as digital-asset trading. Reaching that stage will depend on institutional acceptance, compatibility with existing infrastructure and clear rules governing custody, margin requirements and cross-border transactions.
Until these conditions are established, tokenized fund shares remain an active collateral tool in digital-asset markets, while their broader role in traditional finance is still taking shape.
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