BlackRock’s Influence and the Future of MMFs

In the world of finance, innovation acceleration often requires the endorsement of industry giants. BlackRock’s embrace of Tokenized Money Market Funds (MMFs) represents a monumental milestone towards the widespread adoption of tokenized securities. This drives financial institutions to kick off the tokenization of real use cases, fueled by a touch of FOMO (Fear of Missing Out).

By leveraging public blockchains, BlackRock not only demonstrates the viability of blockchain technology in finance but also sets the stage for a transformative shift towards decentralized and open financial solutions. This instills greater confidence in institutions to embrace public blockchains.

Furthermore, BlackRock’s BUIDL fund successfully attracted $245 million in its first week of operations, underscoring the robust appetite from the buy side. This success also indicates the appeal of the 24/7/365 availability, a compelling feature for tokenized forms of highly liquid assets like MMFs. For instance, Ondo Finance’s OUSG (Ondo Short-Term US Government Treasuries) token, previously limited to traditional market hours with a T+2 subscription and redemption time, now allows instant settlement by moving $95 million of assets to BlackRock’s BUIDL.

In addition, prominent players in the web3 space are starting to create solutions to support tokenized funds. For example, Circle’s latest smart contract feature allows BUIDL holders to exchange shares for its stablecoin USDC, enabling effortless 24/7 transfers on the secondary market.

Nevertheless, BlackRock initially utilized only one specific marketplace for tokenized MMFs distribution, whereas the future vision for tokenized MMFs and other securities extends far beyond singular centralized platforms. The next frontier is broader distribution across diverse trading platforms and DeFi protocols. As a result, tokenized MMFs can be distributed to any distributor platform and serve as collateral for lending smart contracts or liquidity pool deposits within automated market makers, unlocking accessibility, utility, and ultimately liquidity.

Enabling this expansion requires advanced smart contracts and robust token standards such as ERC-3643 to ensure compliance at the token level. Excitingly, the ERC-3643 standard has gained significant traction through the push of the community-formed non-profit association. For several years at Tokeny and now with the association, we’ve had the privilege of presenting this standard to several regulators, including the SEC (US), CSSF (Luxembourg), BaFin (Germany), DFSA (Dubai), FSRA (Abu Dhabi), and MAS (Singapore). More and more, the framework’s ability to uphold existing security laws is now recognized globally.

With the market readiness and industry-wise recognition of the standard, top-tier institutions are now approaching us for assistance in tokenizing MMFs. Last month, we announced our partnership with Moreliquid to tokenize the HSBC Euro Liquidity Fund using ERC-3643. This is just beginning, and we’re excited to share major announcements with the market very soon. Stay tuned for more updates!