As a seasoned researcher with years of experience navigating the intricate world of finance and technology, I find this latest move by BlackRock to be a significant step forward in bridging the gap between traditional and digital asset markets. Having closely followed the evolution of cryptocurrencies and their derivatives, it’s fascinating to witness such a titan of the financial industry embracing this new frontier.
It appears that BlackRock, the asset management company, is reportedly advocating for its digital token in money markets to serve as security in trades involving cryptocurrency derivative contracts.
As per a Bloomberg report dated October 18th, the company is negotiating to link its BlackRock USD Institutional Digital Liquidity Fund (BUIDL) token with leading cryptocurrency exchanges like Binance, OKX, and Debirit. Securitize, a brokerage firm, is said to be involved in this initiative.
Making this move will broaden BUILD‘s capability to serve as security, thereby increasing its competitive edge against stablecoins predominantly utilized as collateral in cryptocurrency derivative trading, like Tether’s USDT.
It was found through CCData analysis that more than three-quarters (70%) of the overall cryptocurrency trading activity in September was tied to derivatives, amounting to approximately $3 trillion worth of derivative contracts being exchanged on centralized platforms.
As an analyst, I’d put it this way: Derivatives are agreements that mirror the value of underlying assets such as stocks or cryptocurrencies. These instruments enable traders to speculate on price fluctuations or shield themselves from potential losses. To secure these transactions, collateral – often in the form of a deposit – is held as a safeguard to cover any potential losses.
BUIDL is already accepted as collateral by FalconX and Hidden Road, two of the largest crypto brokers. The token has a minimum investment of $5 million and is available only for qualified institutional investors.
On October 3rd, a subcommittee at the Commodity Futures Trading Commission (CFTC) supported a suggestion to enable digital assets as security for commodities and derivatives trading. If approved by year-end, this decision could represent a significant step forward in merging traditional finance and cryptocurrency markets.
This action would grant brokers the ability to incorporate tokens like BUIDL, stablecoins, and various cryptocurrencies into conventional marketplaces through integrated systems, essentially bringing digital assets to traditional trading platforms.
In conversation with Bloomberg, Deribit CEO Luuk Strijers mentioned that they are carefully examining several digital assets as potential collateral, among them BUIDL. Another well-liked tokenized money market fund, the Franklin Templeton OnChain US Government Money Fund (FOBXX), is also backed on Wall Street.
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2024-10-18 22:09