In a massive vote of confidence for blockchain-based tokenization, the monolithic asset management firm BlackRock has led a $47 million strategic funding round in one of the leading forces in this space, a firm called Securitize.

The investment shows BlackRock’s growing adoption of digital assets, blockchain technology, and real-world asset (RWA) tokenization as it looks to drive “transformation in capital markets infrastructure.”

BlackRock’s Joseph Chalom, the firm’s Global Head of Strategic Ecosystem Partnerships, will join Securitize’s board of directors.

“Our investment in Securitize is another step in the evolution of our digital assets strategy,” Chalom commented about the deal.

The cash infusion will help Securitize advance its mission of using blockchain technology to tokenize traditional assets like equities, bonds, real estate, and mutual funds. Other participants in the funding round included Hamilton Lane, ParaFi Capital, Tradeweb Markets, and crypto companies like Circle and Paxos.

Tokenization Aims to Enhance How Traditional Assets are Traded

So what exactly is tokenization and why is BlackRock so interested in it? To put it simply, it’s the process of issuing traditional assets as digital tokens on a blockchain or digital ledger.

These tokens can then be traded seamlessly with benefits that traditional markets can’t beat or offer like 24/7 accessibility, fast transactions, real-time settlement, automated compliance, and fractional ownership.

Carlos Domingo, co-founder and CEO of Securitize, expressed a lot of excitement over the “transformative potential of blockchain technology to reshape the future of finance.” He highlighted that tokenization in particular is a trend that is particularly “promising” in the web3 space.

Other investors who participated in this latest funding round echoed the revolutionary impact that tokenization could have in unlocking liquidity and democratizing access to investment opportunities.

Blackrock’s Investment Comes on Top of its Partnership with Securitize to Launch BUIDL

blackrock participates in latest funding round from securitize

Securitize’s capital rise coincides with the launch of BlackRock’s first tokenized fund issued directly on the Ethereum blockchain – the BlackRock USD Institutional Digital Liquidity Fund (BUIDL).

Through its partnership with Securitize, investors can purchase the BUIDL token, which functions as a stablecoin as it aims to maintain a peg to the US dollar – a $1 fixed price per BUIDL token. BUIDL is backed by the fund’s assets, which include primarily cash, Treasuries, and repo agreements.

The fund currently manages $375 million in assets and allows investors to earn a yield paid out in new BUIDL tokens daily. The token can be transferred to other investors who have been vetted by Blackrock in real-time at any given point. Unfortunately for most investors, the BUIDL fund has a minimum investment of $5 million.

“Being able to become a provider for BlackRock, for a small company like us, has been quite a journey,” Domingo told Fortune Magazine. “[The partnership] signals the intention to be a long-term strategic relationship.”

Meanwhile, Hamilton Lane, another financial company working alongside Securitize to offer tokenized investment products highlighted that they are “excited” to keep collaborating with the company in both existing ventures like its Senior Credit Opportunities Fund (SCOPE) and new initiatives that make “the private markets accessible to a broader set of investors.”

Securitize Went All In on Compliance to Attract Big Players Like Blackrock

While tokenization is a relatively nascent trend, Securitize has differentiated itself from its rivals by focusing on compliance and working within existing financial regulations. The company holds a broker-dealer license issued by the US Financial Industry Regulatory Authority (FINRA) and works exclusively with securities that have already gained regulators’ nod to steer clear of grey areas like crypto tokens that may be considered unregistered assets.

“I’ve been running an actual business with a live product,” Domingo said, contrasting Securitize’s approach with upstart players making ambitious claims.

This mindset of building a business whose operations stay away from regulators’ crosshairs has helped Securitize secure major partnerships with other companies beyond Blackrock and Hamilton Lane. For example, the firm has tokenized funds for KKR and even operates its own alternative trading system.

With these new funds, Domingo emphasized that Securitize will aim to obtain additional licenses like the SEC’s “special purpose broker-dealer” designation to broaden its offerings.

Bringing Wall Street to Web3 to Cater to Web2 Customers

From Domingo’s vantage point, tokenized products could bridge the gap between traditional and decentralized finance (DeFi) in two key ways. The first is bringing established investment vehicles like money market funds onto blockchains and Web3, as BlackRock has done with BUIDL.

However, the biggest opportunity may be using tokenization to introduce DeFi products like high-yield private credit funds to customers who can only be used or access Web2 solutions.

“Tokenization, by allowing this very efficient fractional ownership, and with all this multitude of investors and securities in an efficient way, opens up democratization”, Domingo explained.

Lower costs, higher liquidity, and lower required investment minimums could dramatically expand access to vehicles that were previously reserved for ultra-wealthy individuals and institutions.

Blackrock Sends a Clear Message About the Appeal of Tokenization to Big Finance

While tokenization is still a relatively young movement, Securitize’s landmark deal with BlackRock helps illustrate the nearly limitless potential that merging traditional finance with blockchain technology offers.

Moving from a partnership to pouring capital into Securitize, Blackrock is sending a clear message: Tokenization is no longer just experimental but a foundational piece of the future of the global financial system.

“For years, we’ve been grinding and working on our tech stack, getting all our licenses, and being regulatory compliant”, Domingo reflected. “The fact that this has led to work with the largest asset manager in the world, issuing the largest tokenized fund in history, […] is a super big accomplishment.”