Source: Forbes
The Real-World Asset (RWA) trend has emerged as a significant sector in the financial industry, blending traditional finance with blockchain technology, peaking in 2024. Leading asset management company BlackRock has made major advancements in Real World Assets (RWA) after the Bitcoin ETF launch earlier this year, now managing $21 billion in BTC volume. The rights to a variety of assets, including bonds, stocks, real estate, and cultural assets, will be tokenized through RWA products. This innovation aims to democratize historically less accessible investment opportunities by promising increased liquidity, proof of ownership, and transparency.
“All tradable assets will be tokenized”. This bold prediction is becoming a reality as institutional players seek secure entry points into the burgeoning world of digital assets. Initially, Exchange Traded Funds (ETFs) provided a gateway for these institutions. Now, with massive amounts of assets under management, these entities are keen to bring other types of assets they manage onchain, necessitating robust products.
The BUIDL fund, officially named the BlackRock USD Institutional Digital Liquidity Fund, marks BlackRock’s foray into tokenized assets on a public blockchain with a partnership and integration with Securitize, led by Carlos Domingo. Leveraging the Ethereum network, BUIDL invests in cash, short-term debt securities, and U.S. Treasury bonds. While the number of holders in the fund is 14 so far, there are 462m circulating tokens, each valued at approximately $1, resulting in a total fund value of $462 million.
As BUIDL provides qualified investors with an opportunity to earn US dollar yields, it attracted the first $240 million in deposits during its first week, with Ondo Finance contributing a sizable portion. Another important integration was with Circle: its new smart contract functionality facilitates a seamless “off-ramp” for BUIDL investors, allowing them to quickly and easily exit their positions in the fund and receive USDC, a stablecoin pegged to the US dollar, 24/7.
One of the critical pieces in this digital transformation is asset management and proof of funds that is digestible by institutional players but also transparent and deterministic by Web3 standards. The easiest assets to track are cryptocurrencies, due to public ledgers, and real estate due to the immovable physical attribute. In contrast, other assets, like gold, can be opaque and subject to manipulation, as evidenced by numerous vault scandals. To avoid financial collapses like the 2008 crisis in traditional finance (TradFi) and crypto scams like the FTX debacle in centralized finance (CeFi), there is a pressing need for proof of reserves, potentially computed through third-party integrations. Now, a new integration takes this trend a step further, demonstrating the crucial role of onchain proof of reserves transparency.
On June 6th, Jiritsu, a layer one blockchain RWA platform, backed by gumi Cryptos Capital, Republic Capital, Polymorphic, Tokentus, Susquehanna and other investors, announced its integration with BlackRock’s ecosystem to enhance RWA verification. This integration is set to revolutionize how RWAs are managed and verified. While Jiritsu is building support with institutional assets, the company does not have a commercial relationship with BlackRock.
According to the press release, Jiritsu’s technology extends the concept of proof of reserves to include the precise value backing Bitcoin ETFs and any RWA, thereby setting a new industry standard.
“ETF flows not only imply sentiment but also can cause displacement and mispricing in the underlying assets. For example, in the Columbia study, large ETF flows may push the price of underlying stocks away from their fundamentals-based value. BTC has a very meaningful impact on all onchain assets, whether through cost basis or correlation. By bringing the ETF flows onchain, DeFi now has the ability to create derivatives based on these flows, which will not only create opportunities to trade but also manage risk for crypto broadly, enhancing market efficiency and reducing volatility.”
Larry Fink, CEO of BlackRock, has been a vocal advocate for the tokenization of next-generation securities. This integration aligns perfectly with his vision, facilitating greater transparency and trust in tokenized assets. Jiritsu’s technology supports transparency and tokenization efforts, providing an end-to-end solution for assets backed by tokenized funds. This includes the verification of reserves and valuations, along with integration with other tokenization, compliance, and KYC/ID platforms.
On the question of what assets will be tokenized next after stablecoins, and which ones will need proof of reserves onchain, Michael Lustig, former Managing Director at BlackRock and current Jiritsu board member, shared: “Our approach allows for the complete management of structured product transactions, including the modeling and tracking of all underlying collateral cash flows and codifying the contingent waterfall for investments that flow from the structure. As such, we can address any asset structure. In order of complexity, this ranges from early adopters of asset-backed stablecoins, to more complex scenarios like gold-backed stablecoins in custody at Brinks, to tokenization of real estate loans, supply chain inventories, and ultimately, fully complex private equity-owned businesses.”
Through its technology, Jiritsu expands the possibilities for DeFi protocols while simultaneously improving RWA tokenization and verification. Jiritsu facilitates safe and inventive financial solutions that are transparent, dependable, and secure by giving precise and up-to-date information on the verified reserves supporting tokenized assets and BTC ETFs.
As companies like BlackRock and native Web3 entities such as Securitize, Coinbase, and Jiritsu advance with technology enhancements and collaborations, we can observe how both decentralized and traditional finance become more secure, efficient, and transparent, encouraging users and businesses to adapt to the evolving digital landscape.
This integration not only sets new benchmarks for transparency and trust but also showcases other cases where onchain transparency is making a difference. For example, RWA.xyz is a notable platform in the overall RWA space, facilitating data about RWA tokenization and management of various assets.
Looking ahead, the future of RWA offerings appears promising. With advancements in blockchain technology and increasing adoption by leading financial institutions like BlackRock, the integration of onchain transparency will likely become a standard practice. This shift will empower decentralized finance solutions, offering synthetic assets, options, and unprecedented insights into asset flows.
BlackRock’s decision to partner with established Web3 companies rather than building blockchain solutions in-house exemplifies a strategic approach that leverages existing expertise to quickly and efficiently enter the digital asset space. By collaborating with firms that have already navigated the complexities of blockchain technology, BlackRock can tap into a wealth of specialized knowledge and infrastructure without the steep learning curve and resource investment required for internal development. This strategy allows BlackRock to rapidly deploy innovative financial products, such as the BUIDL fund, developed in partnership with Securitize. Utilizing Ethereum’s blockchain infrastructure, these partnerships enable BlackRock to deliver secure, scalable, and compliant tokenized assets, aligning with the rigorous standards expected by institutional investors.
This collaborative approach accelerates time to market, which is crucial in the fast-paced financial landscape. Building blockchain solutions from scratch demands significant time and resources, including the acquisition of specialized talent and the development of new technologies. By working with experienced Web3 firms, BlackRock can focus on its core competencies in asset management while integrating advanced blockchain solutions that enhance transparency, efficiency, and security. This not only ensures high standards but also helps in mitigating risks associated with new technology implementations. For example, BlackRock’s partnership with Coinbase Custody for secure digital asset storage leverages Coinbase’s established expertise, ensuring robust security and compliance frameworks are in place from the outset.
Furthermore, these partnerships enhance credibility and trust in BlackRock’s digital asset offerings. Collaborating with reputable Web3 companies signals to investors that BlackRock’s solutions are built on solid, trusted foundations. This trust is essential for attracting both institutional and retail investors who may have concerns about the volatility and security of digital assets. The trend of partnering with specialized firms is evident across the financial sector. These collaborations underscore the value of leveraging external expertise to drive innovation and maintain a competitive edge in the evolving financial landscape. This approach not only accelerates technological adoption but also provides a blueprint for other corporations aiming to integrate cutting-edge technologies through strategic partnerships.
