BlackRock’s BUIDL, the USD Institutional Digital Liquidity Fund, is a tokenized fund launched in March 2024 on the Ethereum blockchain, backed by U.S. Treasury bills, cash, and repurchase agreements, and has surpassed $1 billion in assets under management. It’s a well-documented initiative in the tokenized finance space. Claims about Fidelity launching a “digital dollar” have surfaced recently, suggesting it would be backed by U.S. Treasury bills and positioned as a direct competitor to BUIDL.
BUIDL is a fund that invests 100% of its assets in cash, U.S. Treasury bills, and repurchase agreements (repos)—safe, liquid instruments traditionally found in money-market funds. What sets it apart is its tokenization: ownership is represented by BUIDL tokens, ERC-20 tokens on Ethereum, designed to maintain a stable value of $1 per token. Investors earn yields in U.S. dollars, with dividends accrued daily and distributed monthly as new tokens directly to their wallets.
It’s aimed at institutional investors, with a minimum investment of $5 million, and operates under a British Virgin Islands entity, exempt from certain U.S. SEC regulations via Section 3(c)(7) of the Investment Company Act. BlackRock partnered with Securitize, a digital asset securities firm, to tokenize and manage the fund, while BNY Mellon serves as custodian for the underlying assets. Other key players include Anchorage Digital, BitGo, Coinbase, and Fireblocks, providing wallet and infrastructure support.
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Fidelity is known to be active in the digital asset space—offering crypto custody and trading services through Fidelity Digital Assets since 2018 and participating in tokenization efforts, such as Sygnum’s $50 million tokenized investment in Fidelity International’s Institutional Liquidity Fund in March 2024. But a specific “digital dollar” launch targeting BUIDL remains unconfirmed.
Tokenized finance refers to the process of representing traditional financial assets—like stocks, bonds, real estate, or cash equivalents—as digital tokens on a blockchain. These tokens are programmable, divisible, and tradable, leveraging blockchain’s decentralized, transparent, and secure infrastructure to modernize how assets are issued, managed, and exchanged. At its core, tokenization converts ownership rights into a digital format. For example, instead of holding a paper certificate for a U.S. Treasury bill or relying on a bank’s ledger, you could own a token that represents a fraction of that bill.
Each token is backed by the underlying asset, ensuring its value, and recorded on a blockchain like Ethereum, where transactions are immutable and verifiable by anyone. The mechanics are straightforward: an issuer (say, a financial institution) creates tokens tied to an asset, often held in custody to guarantee redemption. Smart contracts—self-executing code on the blockchain—govern how these tokens behave, enforcing rules like transferability or interest payments. Investors buy these tokens with fiat or cryptocurrency, gaining exposure to the asset without traditional intermediaries like brokers or clearinghouses.
The benefits are significant. Tokenization enables fractional ownership, so you could own $10 of a $1 million property instead of needing the full amount. It boosts liquidity by making assets tradable 24/7 on global markets, unlike traditional exchanges with set hours. It cuts costs and settlement times—transactions can clear in seconds, not days—by reducing reliance on middlemen. And it enhances transparency, as blockchain records are public and auditable.
BlackRock’s BUIDL fund is a prime example. Launched in March 2024, it’s a tokenized fund backed by U.S. Treasury bills and cash equivalents, running on Ethereum. Investors buy BUIDL tokens, which represent shares in the fund, and receive daily dividends directly as new tokens, all automated via smart contracts. By March 2025, it’s grown past $1 billion, showing how tokenized finance is gaining traction. But there are challenges. Regulatory uncertainty looms—different jurisdictions treat tokens differently, and compliance with securities laws is complex.
Custody risks persist; if the underlying asset isn’t secure, the token’s value is shaky. And blockchain scalability can bottleneck high-volume trading.
In essence, tokenized finance bridges traditional markets and blockchain tech, aiming to make finance more accessible, efficient, and borderless. It’s still early, but it’s reshaping how we think about owning and trading value.
