BlackRock eyes BUIDL for derivatives in crypto exchanges
Asset manager BlackRock is reportedly pushing the money market's digital token to serve as collateral in cryptocurrency derivatives trading.
According to a Bloomberg report on October 18, the company is in talks to integrate the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) token with the trading systems of major crypto exchanges such as Binance, OKX and Debirit. Brokerage firm Securities is said to be a partner of the initiative.
The move expands BUILD's portfolio as a collateral, which widens its competition with stablecoins commonly used to trade crypto derivatives such as Tether USDT.
CCData said derivatives accounted for more than 70% of all crypto trading volume in September, with nearly $3 trillion in crypto derivatives contracts on central exchanges.
The BlackRock BUIDL Offering. Source: BlackRock/Dune Analytics
Derivatives are financial contracts that derive their value from another asset, such as stocks or cryptocurrencies. Traders use derivatives to bet on changes in asset prices or to hedge against losses, and securities act as collateral for these transactions to cover losses.
BUIDL is already accepted as collateral by two of the largest crypto brokers, FalconX and Hidden Road. The token has a minimum investment of $5 million and is only available to institutional investors.
According to data from Security Token Market, BUIDL's market capitalization stood at $547.7 million as of October 18, making it one of the most used asset tokens on the blockchain. The Fund invests primarily in US Treasurys, cash and other liquid assets. Bank of New York (BNI) is behind the convergence of transactions between digital and traditional markets.
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On October 3, a Commodity Futures Trading Commission (CFTC) subcommittee voted to approve a proposal to use digital assets as collateral for commodities and derivatives trading. The decision could receive final approval by the end of the year, marking a significant milestone in the integration of traditional and crypto markets.
The move will allow brokers to use systems like BUIDL, stablecoins and other cryptocurrencies in traditional markets.
In an interview with Bloomberg, Deribit CEO Luke Strugers said the platform is evaluating a number of tokens, including BUIDL, as collateral. The Franklin Templeton OnChain U.S. Government Fund (FOBXX) is another popular money market fund backed by Wall Street.
According to Dune Analytics, the market capitalization of Token Securities at the time of writing is $1.7 billion.
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