BlackRock Files for Digital Shares in $150 Million Money Market Fund to Use Blockchain Tech

Key Takeaways:

• BlackRock is seeking approval to create digital shares for its money market fund that would use blockchain technology to track them.
• The digital shares will mirror ownership records but will not be tokenized, serving as a tool for transparency.
• Institutions have to commit to a minimum purchase of $3 million in digital shares.

BlackRock has filed to issue digital shares for one of its well-known money market funds. These shares are anticipated to reflect the performance of the BlackRock Liquidity Funds Treasury Trust Fund (TTTXX). They will employ blockchain to provide an additional level of transparency regarding the ownership of the shares.

The news, in an SEC filing published today, could signal a significant shift from traditional asset management models regarding the use of blockchain in financial services. The shares themselves won’t be tokenized, but blockchain will be employed to mirror ownership records in the interest of verification, giving investors a transparent way to verify ownership.

The digital shares will be backed by BlackRock’s Treasury Fund, primarily investing in U.S. Treasury bills and cash, worth over $150 million. The Bank of New York Mellon (BNY Mellon) will use blockchain technology to maintain a “mirror record” of share ownership. The blockchain will maintain an updated ledger of share ownership for verification purposes, but it won’t function as the primary, legally binding ownership record.

The barrier to entry for institutional investors seeking to purchase these digital shares is enormous. The DLT shares can only be acquired with a minimum of $3m and the trades will only be done on transactions that pass through BNY Mellon. The exclusivity underscores the product’s strategic, large-scale focus, targeting institutional investors rather than retail ones.

Although the filing doesn’t peg details on a ticker or management fee for the digital shares, the filing foregrounds the potential for blockchain to further leak into mainstream aspects of finance. The filing is aligned with similar moves by other large finance industry players, like Fidelity, which recently filed for an Ethereum-based share class that could represent their own U.S. Treasury fund.

Filing as a longer-term trend in finance: experimentation with blockchain to allow tokenized versions of things like treasury bills and other traditional financial instruments. Already, the treasury tokenization market is more than $6 billion in value, with BlackRock’s BUIDL boasting more than $2.55 billion in assets.

The BlackRock filing comes on the heels of a similar effort by Fidelity, which recently filed for an Ethereum-based OnChain share class. Though Fidelity’s filing remains subject to a regulator’s blessing, the interest in blockchain and financial service is clear. If these filings are granted, it could be an indication that blockchain is being increasingly embraced at traditional financial markets.

The BlackRock’s shift is also a product of the company’s strategic place in a shifting market. BlackRock, with more than $8 trillion in assets under management, has the clout and capacity to push for a shift in how financial products are designed and sold. If this works, these digital shares could replace much of the opacity and overhead in the asset management world.

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