BlackRock eyes BUIDL token as collateral in crypto derivatives market: report

BlackRock is trying to have its digital money-market token, BUIDL, used as collateral in cryptocurrency derivatives trades. 

People familiar with the discussions say the company is ‘in talks’ with major crypto exchanges like Binance, OKX, and Deribit about the possibility, according to Bloomberg.

BUIDL is a token designed for qualified institutional investors, with a minimum investment of $5 million. It is a digital representation of BlackRock’s USD Institutional Digital Liquidity Fund, a money-market fund that invests in U.S. Treasury bills, cash, and other secure instruments. 

BUIDL differs from traditional stablecoins like Tether’s USDT (USDT) because it pays interest to holders, which could be attractive to derivatives traders.

Is BlackRock trying to dominate stablecoins and derivatives markets?

Crypto derivatives are financial contracts that derive their value from crypto price movements. Traders use these contracts to speculate on the price of assets like Bitcoin (BTC) without actually buying them. To participate, traders often need to put down collateral, which can be in the form of stablecoins. Tether’s USDT, for example, is commonly used in this role because it maintains a stable value of $1, making it reliable for securing trades.

However, BUIDL’s entry into this space could challenge USDT’s dominance. BlackRock is hoping that more platforms will accept BUIDL as collateral, which could significantly expand its market reach, per Bloomberg.

Prime brokers FalconX and Hidden Road already allow their clients to use BUIDL as collateral, and custodian Komainu recently joined that list. These early adopters include hedge funds and other institutional investors.

Crypto derivatives trading accounted for over 70% of all crypto trading volume in September, with $3 trillion worth of contracts traded that month alone, according to research firm CCData. 

That makes derivatives a huge part of the crypto ecosystem, and having BUIDL accepted on major exchanges like Binance and Deribit could position BlackRock as a major player in this market.