BlackRock is exploring the possibility of using its digital money-market token, BUIDL, as collateral in the cryptocurrency derivatives market. The company is reportedly in discussions with major crypto exchanges such as Binance, OKX, and Deribit to make this happen, as per Bloomberg.
BUIDL is a token specifically designed for qualified institutional investors, requiring a minimum investment of $5 million. It serves as a digital representation of BlackRock’s USD Institutional Digital Liquidity Fund, which invests in secure instruments like U.S. Treasury bills and cash.
What sets BUIDL apart from traditional stablecoins like Tether’s USDT is that it offers interest to holders, making it an appealing option for derivatives traders. By potentially entering the derivatives market as collateral, BlackRock could be positioning itself to compete with established stablecoins like USDT.
Crypto derivatives are contracts that derive their value from the price movements of cryptocurrencies like Bitcoin, allowing traders to speculate on asset prices without owning them. Collateral is often required to participate in these trades, with stablecoins like USDT commonly used due to their stable value of $1.
BlackRock’s efforts to have BUIDL accepted as collateral by more platforms could challenge the dominance of USDT in the derivatives market. Already, prime brokers like FalconX and Hidden Road, as well as custodian Komainu, have allowed their clients to use BUIDL as collateral. This initial acceptance has attracted hedge funds and other institutional investors to explore the potential of BUIDL.
In September alone, crypto derivatives trading represented over 70% of the total crypto trading volume, with $3 trillion worth of contracts traded. This highlights the significant role derivatives play in the crypto ecosystem. If major exchanges like Binance and Deribit begin accepting BUIDL as collateral, BlackRock could establish itself as a major player in the derivatives market.
Overall, BlackRock’s push to have BUIDL utilized as collateral in the crypto derivatives market signals its ambition to expand its presence in the digital asset space. By offering a token that provides interest to holders, BlackRock is aiming to attract derivatives traders and potentially challenge the established stablecoins in the market. The acceptance of BUIDL on major exchanges could pave the way for BlackRock to become a key player in the evolving landscape of cryptocurrency derivatives trading.