BUIDL: Blackrock's $10T Bet on Ethereum | Carlos Domingo

We're hitting this afternoon uh 150 million in AUM. By the time this gets published, it's probably gonna be three to four hundred million. I don't know, uh depending on how the inflows come. But

Wow.

my sense is that this is going to be a pretty big fun because there's so much stuff out there that is likely to move here.

Welcome to Bankless, where we explore the frontier of BlackRock on Ethereum, tokenizing securities. Really interesting subject today. So earlier this month, the largest asset manager in the world, that is BlackRock, released its first tokenized fund on Ethereum. We talked about this on Bankless. It's called the BlackRock Biddle Fund. So I think David and I knew this was big, like a big deal. But after the recording, the episode you're about to listen to, I think we're realizing it's an even bigger deal than we initially thought. This is about tokenized treasuries on chain. This is about tokenized securities on chain. This is about the largest institutions in the world opening what we call a bank branch on Ethereum and starting to tokenize their assets. A very bullish episode for you today.

Before we get into that episode, we're going to talk to our friends and sponsors over at today on the show. We have Carlos Domingo, who is the founder and CEO over at Securitize. Not BlackRock, uh, but BlackRock uses, leverages, Securitize's software, like a software platform, to help them uh produce and maintain this on-chain security, this tokenized security on-chain. There's been like a mixed reviews about people's perceptions about BlackRock coming and being on-chain. Like, oh, everyone is so excited that BlackRock's here. And then the other half of the uh other half of the people are saying, like, well, why are we celebrating this bank coming on chain? First off, it's actually not a bank. BlackRock's not a bank. It is an investment management firm, has a lot of assets. BlackRock is allowed to go bankless just like everyone else. And so to me, this is the process of BlackRock taking its treasuries, taking its assets, putting them on Ethereum, and taking them away from other people. So this is the process of BlackRock, the largest by capital uh organization firm ever choosing to put their toe into the world of going bankless, starting with the most proximate security after actual dollars, which is tokenized treasuries, putting it on chain. Pretty cool.

Alright guys, we'll get right to the episode with uh Carlos talking about BlackRock on Ethereum. But before we do, we want to thank the sponsors that made this episode possible. Is BlackRock now tokenizing things on Ethereum? Seems like it, maybe. How big of a deal is this? The smart contract that rolled out to Mainnet last week is called Biddle. That stands for BlackRock USD Institutional Digital Liquidity Fund. On the podcast today, we're going to find out what exactly that means and if it's as big a deal as it seems. And we have the perfect guest to guide us through that. Carlos Domingo. He is the founder and CEO at Securitize, a company that tokenizes real world assets. And they were the ones that were involved in the press release and provided the platform to help BlackRock tokenize the Biddle fund. Carlos, welcome to Bankless.

Thank you for having me. Big fun of the pod.

Well, thank you. We're a big fan of um what you're doing in terms of bringing real world assets uh onto our our crypto networks. And so I think we want to start by really trying to understand what actually happened last week because we got excited, crypto got excited. BlackRock, of course, is the largest asset manager in the world, something like 9 trillion in assets under management, absolutely massive. They are uh certainly a bellwether for the rest of traditional finance. And if they are tokenizing, we want to know as much as we can about it. So can you help tell us what is going on? We see a press release here, we see BlackRock tokenizing something. In your words, what just happened last week?

So what happened last week uh is exactly what you said, right? That the largest asset manager in the world decided to take one of their

Uh, their funds uh and tokenize it on the public Ethereum blockchain, which I also agree with you guys. I read the post you guys did yesterday.

This is a bigger deal than most people think. Um

and we've done a lot of tokenization projects over the years, probably more than anybody else, but I think this is uh really an inflection point in the industry

because of the importance of the company doing it,

but also how it was done, and we can talk about the specifics of that. But yes, it's uh it's a big deal, and I hope crypto people realize about it.

So just to nail down some of the specifics here, this is actually not a new fund. This is a pre-existing fund that is now putting being put into the form factor of a digital token on Ethereum. Is that correct?

No, so this is a brand new fund set up specifically to be tokenized. It is just similar to other funds that BlackRock has. BlackRock has, I think, $800 billion of

cash management products, they call it. So these are funds that help companies manage their cash.

And this is one of them, which is very similar to, I think it's called the Fed fund, the one they have, but it's a standalone fund that has been set up brand new for uh you know the tokenization project.

Okay, so w what are the details behind this fund? Like what is the what is the return profile of this fund? What composes this fund?

So the fund contains uh overnight repos and three month duration uh treasuries.

So it will give you the same yield that the the Fed rate uh gives you today. And that obviously depends on how interest rates uh changes, so but uh around that.

Um and then it's a cash equivalent fund if you want, because it's uh what it contains is like uh cash and it's uh as liquid as cash.

Okay, so uh short term interest rates, short term treasuries. This is like cash and cash equivalents. This sounds like the um the safest, most proximate um t uh fund to actual cash. The uh it's like cash plus like the most the most approximate amount of yield possible.

But but it gives you a yield, right? So like if you hold cash, you don't get a yield, or if you go hold stable coins, you don't get a yield. If you if you held this, which is cash equivalent,

then you're getting a yield on your on your assets, right? So it's used for

About we can talk about the use cases, but the the most obvious one is is treasury management, right? Like anybody that has treasury, you keep a portion of it in a in a very safe instrument to make sure it doesn't disappear

uh overnight and that you can convert it in cash anytime you have liquidity needs. So so that's the the kind of uh instrument that we're putting on the Ethereum blockchain now.

R real really dumb one oh one noob question for you, Carlos. Like w when you're talking about a fund, and this is a blackrock a new BlackRock fund, what do you mean by fund? Is a fund just a pool of capital or i is there some specific asset manager meaning to the term fund?

No, a fund is basically an structure, a legal structure that is set up as a fund, meaning that is an investment vehicle where people can uh you know deposit money to that money be deployed in certain underlying assets that you need to disclose who they are, which ones they are, that provides a return to investments. So a fund it could be a private equity fund, uh a VC fund, a credit fund, or these kind of instruments which are referred usually as money market funds.

Would it be accurate to say, Carlos, that this is like a a tokenized treasury? We've been talking a lot on on bankless over the last six months about this sort of uh emerging theme of like tokenizing treasuries. Is that what this is or how proximate to that?

Yeah, it's very close. So you don't tokenize one treasury. Let's say you can buy a T bill for a certain duration and then tokenize that.

This actually is an actively managed fund that they keep, you know, basically buying different treasuries in the underlying. And that what you're buying is the unit of the fund that is actively managed by investment manager, which in this case is uh is BlackRock. So it's it's yes, it's within the realm of

tokenized treasuries, but I will say it's a bit more sophisticated than just taking a treasury and tokenizing it.

What what what is something a similar analog maybe in the in the traditional uh finance world to to what this actually is? Would uh would a money market be in kind of the real

This is essentially a money market fund, correctly.

Okay, so um I actually use a a product in the in the TradFi world uh through Apple Pay. It's really nice because it's integrated uh into the wallet, for instance. And I I think Apple behind the the scenes works with Goldman, basically. And with Apple Pay, you can actually

For the credit card and everything with gone.

Yeah, yeah. There's actually like a credit card and it's there's a high yield savings account. So like my Wells Fargo account, like full disclosure, in case people in Bankless didn't know, both David and I have bank accounts. Uh we bank at Wells Fargo occasionally and try to minimize them whenever possible. You know, some people are very surprised by that, Carlos, but we still do have to pay some uh you know trad bills around here. But anyway, uh so I also have a um an Apple Pay account and they offer a high yield savings. It's like 4.7%, something like this. It's better than what Wells Fargo offers, which is like 0.2%. They are not passing on the savings uh in the checking accounts to their customer. And I think they work through Goldman uh to effectively you know power this. I'm sure Apple gets its cut, Goldman you know like takes its profit.

In seven, a lot of people get a cut in between.

Yeah, exactly. Exactly. So it's not great, but it's much better than my Wells Fargo account. So I guess how um c close is this to something like that? Now it seems like it is gated to institutions, of course. So like retail can't get it in the same way I can get the, you know, 4.75% in my Apple wallet. But like how approximate is it to something like that?

It's very close. So you have on on the blockchain, you have stable coins, right?

That's like like dollars that you can move around.

And then in the real world, you have like the actual dollars, and then you have your saving accounts

that give you a yield, right? So this is the same thing. People can actually move their dollars, their digital dollars, and put them on a, let's say, digital savings account on chain

to start earning a yield.

Something that's uh unique that is part of this um offering this this uh this tokenized product is that it's uh the the tokens themselves are stable coins or worth they're worth one dollar. Um but it's a yield-bearing instrument. And so the way that the yield actually gets sent to the token holders is that every 30 days there is like a an on chain dividend, uh call it, where the yield that was accrued over the last 30 days is sent pro rata to the token holders on chain. Can you talk about the the design choice of why make this a yield uh a stable instrument, stable value instrument? And then the also the design choice of sending the yield every 30 days.

So the first, this is common. Like there's many market money market funds that you buy a unit at a fixed price, let's say a dollar, and then as you accrue interest, they will give you more units of the money market fund. So the the the it's called rebasing and the underlying value of the of the unit of the fund or the token in this case.

Doesn't change. And then

the the way we're doing it though, that is very differently is that once a month, and you know, hopefully one day this will not be once a month, it will be block, block, block, because from a technology perspective, there is no reason why

you know tokens are infinitely divisible, right? So you could think of a scenario where

you know every block on the blockchain, you're creating a 0.0001% of a token, and then you get all those tokens there. But today, we we walk before we run, it's a once a month.

And it's kind of like an airdrop if you want.

That's not a

technical regulatory technical term, it's not a regulatory term, but essentially what you're getting is you're being airdrop

more tokens with the same price into your wallet

every time you do it. And for us, it's uh it's easier than to do it this way,

because from an infrastructure perspective, we basically once a month

we you know calculate in our platform.

Look at all the holders on chains, see how many tokens every wallet has, etc., and then just run one transaction on the blockchain that basically does all their drops to people. So from an operational perspective, it's a super efficient way

of doing it. So