BlackRock Enters Tokenization Era, Unveils Digital Liquidity Fund

BlackRock is not alone in its tokenization quest as the Swiss-based Sygnum Bank embarked on tokenizing a $50 million investment in the Fidelity Institutional Liquidity Fund.

BlackRock announced the BlackRock USD Institutional Digital Liquidity Fund, which will focus on tokenization. The fund will have a minimum investment of $100,000 and will use the Ethereum blockchain for its operations. Sygnum Bank is investing $50 million into the Fidelity Institutional Liquidity Fund, with plans to tokenize these funds on the zkSync layer-2 blockchain. Additionally, the Saudi Arabian government is contemplating a $40 billion investment in AI, in collaboration with venture capital firm Andreessen Horowitz.

BlackRock Launches Tokenization Fund

BlackRock, the world's leading asset manager, has made big strides into the digital asset space by filing a Form D with the United States Securities and Exchange Commission (SEC) for the BlackRock USD Institutional Digital Liquidity Fund, which will be its foray into tokenized asset funds.

The fund, which was established in 2023 under the jurisdiction of the British Virgin Islands, is yet to be launched. Through the Form D filing, BlackRock wants exemptions under Section 3(c) of the Investment Company Act, allowing it to operate with more flexibility and fewer regulatory constraints. The fund also plans to attract large investments with a minimum investment threshold of $100,000. Securitize, a leading U.S.-based digital securities firm, is set to manage the offering and sale of the tokens associated with the fund.

Tokenization, the process of representing real-world assets on a blockchain, is at the core of this initiative. The fund will use the Ethereum blockchain, employing an ERC-20 token dubbed BUIDL. Despite currently having a single holder and no on-chain market cap, the fund recently received a pretty big boost with a $100 million transfer, according to data from Etherscan.

The move comes after BlackRock's major success in launching a spot Bitcoin exchange-traded fund (ETF), one of the first to receive SEC approval. Larry Fink, the CEO of BlackRock, has openly shared his bullish stance on Bitcoin and the broader potential of blockchain technology. He sees a future where financial assets, including stocks and bonds, are tokenized on a unified ledger. This approach promises enhanced transparency, reduced illicit activities, and the potential for instantaneous settlements.

This initiative not only represents a major milestone for BlackRock but it also signifies a growing acceptance and integration of blockchain technology in the mainstream financial industry.

Tokenization for Transparency

The Swiss-based global digital asset banking group, Sygnum, announced a $50 million investment in the Fidelity Institutional Liquidity Fund on behalf of its client Matter Labs. This investment is attracting some attention not just because of its size but for the innovative approach to its management: the funds will be tokenized, which will be the first step in Matter Labs’ strategy to transition its treasury reserves to the blockchain with the oversight of institutional custodians.

The tokenization process will take place on the Ethereum-based zkSync layer-2 blockchain, curated by Matter Labs itself. This process will convert the investment into digital tokens that represent a stake in the Fidelity Institutional Liquidity Fund, a $6.3-billion umbrella for money-market funds based in Ireland. The initiative is designed to improve transparency for Matter Labs' proof of reserves, with Marco Cora, the Senior Vice President of Business and Operations at Matter Labs, pointing out that the move is a demonstration of zkSync blockchain's "institutional-grade security" and the company's commitment to transparency.

The zkSync blockchain, which was founded in 2018, aims to enhance scalability for Ethereum decentralized applications (DApps). Its launch in April of 2023 came after a successful Series C funding round in November 2022, which raised $200 million. zkSync has also shown very impressive growth, reaching a peak total value locked (TVL) of $870 million in March before registering $715 million in TVL as of Mar. 19, according to L2BEAT's tracking.

Sygnum's foray into the tokenization of assets and its engagement with blockchain technology is not new; the bank claimed to be the first to tokenize its own assets in 2020 and has since offered its clients access to crypto staking. Additionally, its Singapore subsidiary secured a Major Payment Institution license in October of 2023, expanding its services to crypto brokerage for accredited investors and institutions.

A $40 Billion Leap into AI

The latest developments in crypto are not limited to tokenization. The Saudi Arabian government is considering establishing a massive $40 billion investment fund dedicated to artificial intelligence (AI), according to a report from The New York Times. This move could potentially position Saudi Arabia as the largest investor in the AI domain. The Public Investment Fund of Saudi Arabia is reportedly in talks with the Silicon Valley-based venture capital firm Andreessen Horowitz (a16z) to manage the AI investments. Discussions about this partnership and the possibility of a16z opening an office in Riyadh, Saudi Arabia's capital, have been ongoing since at least April of 2023.

This ambitious investment plan would be sourced from the Kingdom's $900 billion sovereign wealth fund, aiming to support advancements in chip making and large data centers critical for AI technology. If it actually happens, the $40 billion investment would surpass Microsoft's $13 billion investment in OpenAI. It is also expected that the plan could be launched as soon as the second half of 2024.

This initiative comes as there is a very clear growing focus on AI, which can be seen in U.S. President Joe Biden's executive order for new AI safety standards and OpenAI CEO Sam Altman's request for $7 trillion from the United Arab Emirates for semiconductor chip development.