BlackRock tokens edging closer to mainstream use as collateral

Efforts to allow the use of tokenised shares of money-market funds from Wall Street giants such as BlackRock and Franklin Templeton as collateral for trading advanced a step forward after a group of financial firms voted to ratify guidelines for their use.

A subcommittee of the Commodity Futures Trading Commission's Global Markets Advisory Committee voted Tuesday to pass its recommendations on the subject to the full committee. The recommendations describe how registered firms can use distributed ledger technology to hold and transfer non-cash collateral.

These recommendations will already have pre-existing regulations and processes so that blockchain can be utilised in a manner consistent with CFTC and other US regulators and derivatives clearing organisations' margin requirements. The full committee is going to vote on the recommendations sometime later this year.

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This means that if the proposal's recommendations become fully ratified, it has the potential to expand the utilisation of tokenisation since many firms are looking to collateralise tokens for capital efficiencies. McKinsey estimates that the aggregate of the tokenised market excluding stablecoins - may reach $2 trillion by 2030 as it is driven by mutual funds, bonds and exchange-traded notes, loans and securitisations, and alternative funds. It is roughly about the same size as the entire crypto market.

Crypto prime brokers Hidden Road and FalconX are now allowing BlackRock's BUIDL token to be accepted as collateral.

Citadel, BlackRock, Bank of New York Mellon, and Bloomberg LP, the parent company of Bloomberg News, are all members of the CFTC's Global Markets Advisory Committee.