BlackRock’s Tokenization Drive Gains Traction as Traditional Finance Goes Onchain

BlackRock’s BUIDL tokenized money-market fund has accumulated around $2.3 billion since its launch in 2024. The asset manager is now exploring whether tokenized fund shares can be used as collateral across traditional financial markets, potentially extending their role beyond cryptocurrency trading.

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. BlackRock’s next objective is to explore their use within Wall Street’s broader financing infrastructure, where conventional money-market funds help support trading positions and margin requirements.

Tokenization allows fund ownership to be represented digitally and transferred without changing the underlying investments. Instead of redeeming shares for cash before transferring value, approved investors could move tokenized fund interests directly or pledge them as collateral while remaining invested.

Money-market funds are already widely used to meet initial and variation margin obligations. If tokenized shares receive similar recognition, institutions could pledge or transfer their holdings without first converting them into cash. This could simplify collateral transfers and improve the efficiency of financial transactions.

However, the ability to transfer tokens continuously does not mean investors can redeem them for cash at any time. Blockchain transactions may operate around the clock, but redemptions remain subject to the fund’s specific terms and procedures.

Legal and Technical Obstacles Remain

Wider adoption in traditional finance will require banks and other institutions to recognize tokenized fund shares as acceptable collateral. Existing financial systems must also support these instruments, while regulators need to establish clear rules governing their legal treatment.

The International Monetary Fund has warned about fragmented platforms, legal uncertainty and difficulties connecting tokenized products with established financial infrastructure. These challenges determine whether tokenized assets can function across different institutions and financial networks, rather than simply move between blockchain addresses.

The International Swaps and Derivatives Association has also highlighted unresolved questions involving custody, asset segregation, capital requirements, margin rules, cross-border recognition and legal enforceability. Chief Executive Scott O’Malia has identified these areas as important priorities for integrating tokenized assets into conventional finance.

For institutional investors, tokenized shares must retain clearly defined legal rights when transferred between counterparties and jurisdictions. Blockchain technology can facilitate the transfer, but financial firms also need reliable procedures for accepting, valuing, holding and returning collateral.

BUIDL Could Help Expand Tokenized Asset Adoption

BUIDL’s $2.3 billion scale provides BlackRock with an established foundation for developing additional institutional applications. However, wider use as collateral will depend on whether banks, brokers and other financial participants are willing to accept the fund in actual transactions.

According to Nikhil Sharma, a director on BlackRock’s digital-assets team, early users have primarily included crypto-market participants, such as stablecoin holders seeking yield. Expanding into conventional financial markets will require new institutional relationships and operating arrangements that fit existing market practices.

The initiative reflects a broader shift in the financial industry’s approach to tokenization. Institutions are increasingly exploring whether digital representations of stocks, bonds and money-market funds can improve how financial assets are transferred, pledged and managed.

For BlackRock, tokenized funds could eventually support collateral operations in both cryptocurrency markets and traditional finance. Achieving that goal will depend on institutional acceptance, compatible infrastructure and regulatory clarity around custody, margin treatment and cross-border transactions.

Until these requirements are addressed, tokenized fund shares will continue to have an established role in digital-asset markets, while their expansion into mainstream financial systems remains a developing opportunity.