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

BlackRock is trying to enable its digital currency market token BUIDL to be used as collateral in cryptocurrency derivatives trading.

People familiar with the discussions say the company is ‘in talks’ with major crypto exchanges such as 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 safe instruments.

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

Is BlackRock trying to dominate the stablecoin and derivatives markets?

Crypto derivatives are financial contracts that derive their value from crypto price movements. Investors use these contracts to speculate on the price of assets like Bitcoin (BTC) without actually purchasing them. To participate, investors must deposit collateral, which can often be in the form of stablecoins. For example, Tether’s USDT is widely used in this role because it maintains a fixed value of $1, making it reliable in securing trades.

However, BUIDL’s entry into this space could challenge USDT’s dominance. BlackRock hopes more platforms will accept BUIDL as collateral, which could significantly expand market access, according to Bloomberg.

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

According to research firm CCData, crypto derivatives trading accounted for more than 70% of all crypto trading volume in September, with $3 trillion in contracts traded that month alone.

This makes derivatives a big part of the crypto ecosystem, and BUIDL’s acceptance on major exchanges like Binance and Deribit could position BlackRock as a major player in this market.