The BlackRock USD Institutional Digital Liquidity Fund has achieved a significant milestone by becoming the largest treasury fund tokenized on a blockchain. In just six weeks, BlackRock’s product, known as BUIDL, has reached a market capitalization of $375 million, surpassing Franklin Templeton’s product, BENJI, which has been in existence for a year and has a market capitalization of $368 million. The data comes from Dune Analytics.
Last week, BUIDL attracted $70 million in investments, including a $50 million contribution from Ondo Finance’s OUSG token, a company specializing in real-world asset tokenization. In contrast, BENJI’s assets under management decreased by approximately 3.7% during the same period.
The current trend of tokenizing real-world assets on blockchain platforms has gained significant attention. BlackRock CEO Larry Fink recently expressed his belief that capital markets could benefit from transitioning to blockchain-based systems, making them more efficient. It’s not just treasuries that can be tokenized; stocks, real estate, and various other assets can also be represented digitally.
However, despite the potential benefits, there is currently low demand for these tokenized products. According to 21.co research strategist Tom Wan, this is primarily due to “thin liquidity.” Issuers are hesitant to tokenize assets on-chain when there is limited demand, creating a “chicken and egg problem.” However, there is optimism for the future, as there is already demand for U.S. Treasurys from participants in the stablecoin market, which has a total value of $140 billion. Once demand increases, it will be easier to find end investors willing to switch over to tokenized assets.
Currently, tokenized government securities represent 1.4% of the total assets tokenized on-chain, a significant increase from 0.1% at the beginning of 2023. Wan predicts that this market dominance will continue to grow and reach 10% in the future. He also believes that mid to late-stage private equity firms have the most potential for growth in the tokenization space.
Wan expects that other ETF issuers will follow the lead of BlackRock and Franklin Templeton and tokenize real-world assets on-chain. This aligns with Boston Consulting Group’s estimation that the blockchain-based tokenization market will be worth $16 trillion by 2030.
In conclusion, the BlackRock USD Institutional Digital Liquidity Fund has become the largest treasury fund tokenized on a blockchain, surpassing Franklin Templeton’s product. The tokenization of real-world assets is gaining attention, although there is currently low demand due to “thin liquidity.” However, there is optimism for the future, as demand for U.S. Treasurys already exists in the stablecoin market. Tokenized government securities currently represent 1.4% of total on-chain assets, and this market is expected to grow to 10% in the future. Other ETF issuers are likely to follow BlackRock and Franklin Templeton’s lead in tokenizing real-world assets on-chain. Boston Consulting Group predicts that the tokenization market will be worth $16 trillion by 2030.