BlackRock eyes crypto derivatives market with BUIDL as collateral

The move could boost significantly the nearly $550 million market cap presented by BUIDL, the largest tokenized US treasuries fund.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

BlackRock is reportedly in discussions with several centralized exchanges to allow its BUIDL fund to be used as collateral for derivatives trades

As reported by Bloomberg on Oct. 18, people familiar with the matter shared that the move includes exchanges such as Binance, OKX, and Deribit.

This move is part of a broader push by Wall Street firms to deepen their involvement in the digital asset markets. BlackRock’s BUIDL token requires a minimum investment of $5 million and is specifically designed for qualified institutional investors.

FalconX and Hidden Road, two major crypto prime brokers, already permit their hedge fund clients to use BUIDL as collateral, while custodian Komainu recently announced its clients would be able to trade via Hidden Road using the token as collateral.

Market expansion

Direct acceptance of BUIDL on platforms like Binance and Deribit would significantly increase its market reach.

The crypto derivatives market moved nearly $3.5 trillion in September, which is almost four times larger than the spot market, according to data from Coinglass and The Block.

While BlackRock has yet to comment on the initiative, Deribit CEO Luuk Strijers acknowledged that the exchange is considering various tokens, including BUIDL.

However, Strijers stressed the need for regulatory approvals and a deeper understanding of the token’s technical aspects before moving forward.

DeFi and traditional finance entangled

The report of the world’s largest asset manager moving deeper into crypto coincides with another report about a crypto-native company delving into traditional finance.

Tether Limited, the issuer of the Tether USD (USDT) stablecoin, is reportedly considering offering lending to commodities trading companies. The move is a possible alternative the crypto firm found to leverage its $5.2 billion profit registered in the first half.

Moreover, decentralized finance (DeFi) protocols are already considering using BUIDL tokenized shares in financial instruments.

On Aug. 26, leading money market platform Aave proposed a new GHO Stability Module (GSM) based on BlackRock’s tokenized fund. GSM is a mechanism created by Aave to help maintain the peg of its ecosystem’s stablecoin, GHO.

When users swap USD Coin (USDC) for GHO, the novel module would allow the exchange of USDC for BUIDL. According to the proposal, this would help GHO’s stability while providing value accrual to users through BlackRock’s offered yield.

Moreover, stablecoin issuer Ethena Labs revealed a new stablecoin fully backed by BUIDL on Sept. 26. The UStb would offer an alternative to Ethena’s USDe, appealing to users with a more conservative appetite for risk.

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