As we move ahead in time, the technological revolution is reshaping every industry it enters. On 03/01/2024, Citi Bank confirmed that it had completed the proof of concept on tokenizing private funds along with Wellington Management and WisdomTree, the fund managers. Citi Bank is not the only one that uses blockchain technology in finance; Hamilton Lane uses blockchain to expand access to one of its funds, followed by Blackrock and other major companies.
Understanding the complexities of these emerging technologies is only a few people’s cup of tea; today, we have brought you a blog on tokenized funds that provides a complete understanding of tokenization and tokenized funds.
Table of Contents
What Do Tokenization Funds Mean?
Before diving into tokenization funds, let’s first understand tokenization. Tokenization is the process of digitalizing assets like equity, coins, etc., using blockchains to develop tokens. These equity tokens are akin to equities listed on the stock exchanges, but this time, they are crypto tokens.
Similar are the tokenized funds, which are tokenized versions of the funds. For example, with many such examples, BUIDL is Blackrock’s Ethereum-based tokenized fund, which was in high demand within one week of its launch and attracted $245 million in deposits.
How Does Tokenization Work?
We have already explained to you “what tokenization is.” Now, let’s understand how it works in Web3. Web3 is a decentralized internet where blockchain technology lets users control their data and assets. In Web 3, the token is used on a (typically private) blockchain, which allows it to be used within specific protocols.
About BUIDL Tokenized Fund
We have already told you that Blackrock launched its tokenized “BUIDL” fund, which received a total deposit of $245 million within the first week of its launch. Blackrock is a high-profile investment management company, and BUIDL is its first tokenized fund. BUIDL is an Ethereum-based fund built through Securitize, an asset tokenization platform. It represents the investment fund that holds U.S. Treasury bills and repo agreements. Within just one week of entering the market, it gained a significant share of the blockchain-based tokenized U.S. Treasury market.
Is The Time Finally Right For Tokenization To Catch On?
It is quite difficult to say whether it is the right time for tokenization to take off, but recent developments give a positive sign. According to McKinsey and Co., there is around $120 billion of tokenized cash in circulation, and according to the coin desk, the tokenized Treasury market grew ninefold in early 2023.
