Bernstein Analysts Assess BlackRock‘s Recent Ethereum and Cryptocurrency Move: What’s Its Significance？

BlackRock, the world's largest asset manager, plans to launch a tokenized fund that “gives legitimacy” to public smart contract chains like Ethereum, according to analysts at research and brokerage firm Bernstein.

The decision to use the public Ethereum blockchain as opposed to private chains like JPMorgan's Onyx increases interoperability and programmability in an industry previously viewed as “individual casinos,” analysts Gautam Chhugani and Mahika Sapra wrote in a note to clients today:

Use of tokenized funds can be on-chain with stablecoin (e.g. USDC) integration. New asset classes (bonds, stocks, stablecoins) could lead to interoperability between on-chain asset classes and greater programmability based on settlement agreement terms.

“The system built for individual speculation is starting to bring about corporate use areas.”

BlackRock USD Institutional Digital Liquidity Fund (BUIDL) will be a liquid fund that invests in U.S. Treasury bills, repurchase agreements (short-term borrowing agreements for sellers of government bonds) and cash, according to U.S. Securities and Exchange Commission filings. However, a launch date was not given.

While tokenized funds are not new, with Franklin Templeton launching a tokenized money market fund in 2021, BlackRock's decision to find partners from both the traditional and cryptocurrency worlds could reduce friction by encouraging more traditional institutional clients to adopt on-chain funds.

“Tokenization can be seen as the next evolution of financial markets, similar to the ETF wave of the last 20 years,” concluded Chhugani and Sapra.

*This is not investment advice.