- BlackRock is in early talks to list its tokenized money market fund as collateral for derivatives trading on exchanges including Binance, Deribit and OKX, Bloomberg reported.
- Ondo's governance token spiked to 79 cents before paring gains, still up nearly 9% over the past 24 hours.
- Tokenized money market funds as collateral allows traders to keep earning a yield while using them for margin for trading, as opposed to posting stablecoins for collateral.
Real-world asset tokenization platform Ondo Finance's governance token (ONDO) spiked 8% on Friday following a report about asset manager BlackRock's push to list its tokenized money market fund BUIDL as collateral on major derivatives exchanges.
According to Bloomberg's report, BlackRock and issuance partner Securitize are in early talks with crypto exchange giants including Binance, Deribit and OKX to accept BUIDL as margin for trading derivatives.
Ondo's token jumped to 79 cents immediately after the report, advancing 8% in an hour before paring some of the gains. It's price was still up nearly 9% over the past 24 hours, outperforming the broad-market CoinDesk 20 Index's 2.2% daily gain.
While it is not clear how the development would impact the Ondo platform, its governance token has been a favored proxy play among crypto traders for BlackRock's tokenization push, moving abruptly on news related to the asset management giant. Notably, the token jumped as much as 20% when CoinDesk reported that BlackRock filed paperwork with Securitize to create the BUIDL offering. The token also moved when Ondo started to use BUIDL as the backing asset of its own retail-focused money market fund token (OUSG) to offer instant redemptions and conversions for Circle's USDC stablecoin.
Tokenized collateral push
BUIDL is the largest tokenized offering on the market with over $550 million of assets. Its price is fixed at $1 and offers money market yield to investors without leaving blockchain rails. It's offered to institutional investors and other protocols to invest or use it as reserve asset, with a minimum investment limit of $5 million.
Tokenized U.S. Treasuries, backed by short-term government bonds, have grown to a $2.3 billion asset class within crypto assets, tripling in size in a year. Funds, businesses and protocols using them as a vehicle to park their on-chain cash and earn yield fueled the growth. The next frontier for growth might be getting accepted as on-chain collateral asset.
The allure of using these tokens as collateral is that it allows traders to keep earning a yield while using them for margin for a trade, as opposed to posting stablecoins for collateral. Hashnote's $320 million USYC money market fund token got listed on Deribit as cross-margin collateral option earlier this month. Institutional trading services FalconX and Hidden Road already accept BUIDL as collateral asset.
State Street sees significant potential in tokenized collateral asset in traditional finance, too. Donna Milrod, the bank's chief product officer, said in an interview this month that collateral tokens could help mitigate liquidity stress during financial crises, for example allowing pension funds to post money market tokens for margin calls without selling underlying assets to raise cash.
Edited by Stephen Alpher.
