How does BlackRock's BUIDL fund reshape the connection between RWA and DeFi

In March 2024, when the world’s largest asset management firm BlackRock and the tokenization platform Securitize announced the launch of the first tokenized fund buidl on Ethereum, the entire crypto market’s attention was focused on this event. This is not just a product launch; it marks a critical step for traditional finance to enter the crypto world. Previously, BlackRock introduced crypto assets into traditional finance through a Bitcoin spot ETF; this time, buidl reverses the process by bringing the standards, security, and yields of traditional finance into the crypto market, opening the door for RWA (Real-World Assets) to a new DeFi universe.

The Birth of buidl: An Official Declaration of Traditional Finance Entering the Crypto World

If you’ve ever invested in traditional funds, you know the dilemma: subscription and redemption both take time. T+3, T+5 settlement cycles significantly reduce capital efficiency. But BlackRock’s buidl changes all that.

buidl’s full name is “BlackRock USD Institutional Digital Liquidity Fund,” which clearly indicates it is a fund product tailored for institutional investors. Its core logic is simple yet profound—invest 100% of the capital in “dollar-like” assets such as U.S. Treasuries and cash, circulate on Ethereum via tokenization, and ensure each buidl token maintains a stable value of $1.

This seemingly simple design contains huge innovation. Compared to traditional funds, buidl achieves a unified on-chain ledger via blockchain, eliminating the inefficient reconciliation processes caused by multiple parties holding separate ledgers. What does this mean? It means subscription and redemption can be done anytime, anywhere, 24/7, with instant fund transfer. This is a milestone innovation for the financial industry.

Dissecting buidl’s Operating Mechanism: From Securities to Liquid Assets

On the surface, buidl looks like a stablecoin—maintaining a $1 value and transferable between wallets. But in essence, buidl is a security. This identity shapes its entire architecture.

buidl’s Legal Framework

BlackRock has established a special purpose vehicle (SPV) in the British Virgin Islands (BVI) specifically for buidl, and applied for a Reg D exemption from the SEC under U.S. securities law. What does this mean? It means buidl can only be offered to “qualified investors” (minimum investment of $5 million), requiring strict KYC/AML compliance.

Participants’ roles are clearly defined:

• BlackRock Financial: Fund manager, responsible for investment decisions
• Securitize LLC: Tokenization platform, handling on-chain logic and regulatory data conversion
• Bank of New York Mellon: Asset custodian and administrative agent
• PwC: Auditor

This architecture may seem complex, but it is a perfect combination of traditional financial regulation and blockchain technology. Each layer has clear responsibilities and risk isolation, ensuring asset security.

buidl’s Yield Distribution Mechanism

Unlike ordinary stablecoins like USDC, buidl tokens generate yields. These yields come from underlying interest-bearing assets such as U.S. Treasuries, cash, and overnight repurchase agreements. BlackRock will airdrop these yields directly into investors’ wallets each month in the form of new tokens, a process called “Rebase.”

This is the cleverness of buidl: it maintains a stable $1 value (capital safety) while achieving an “interest-earning” effect through Rebase. For institutional investors, this is equivalent to earning U.S. Treasury yields while maintaining liquidity.

The Revolutionary Significance of 24/7 Instant Settlement

In traditional finance, fund subscriptions and redemptions involve multiple steps: order confirmation → clearing → settlement → reconciliation. This process takes at least T+3, often T+5+N days. Each additional day means funds are frozen, and institutions lose a day’s worth of potential earnings.

buidl, through smart contracts and a unified ledger, achieves atomic-level instant settlement. This reduces transaction costs and introduces a new feature to financial markets—around-the-clock real-time pricing. This blockchain-based efficiency embodies the core of the Finternet (Financial Internet) concept.

How buidl Becomes the Infrastructure of DeFi

If buidl is a hybrid of securities and stablecoins, its greatest value lies in connectivity.

The Key Role of USDC Liquidity Pools

Due to buidl’s “security” status, it cannot freely circulate among all users—transfers are limited to verified “whitelisted” investors. This obviously restricts its liquidity.

BlackRock’s partnership with Circle solves this problem. Circle has established a smart contract-controlled liquidity pool that allows buidl and USDC to be exchanged 24/7 at a 1:1 ratio instantly. What does this mean?

It means institutions can quickly enter or exit the buidl ecosystem via USDC as an intermediary. buidl itself does not need to circulate among different investors, but its liquidity is amplified infinitely through USDC.

The First Wave of Ecosystem Applications: ONDO’s Choice

In the RWA U.S. Treasury sector, leading project ONDO Finance made a key decision at the end of March 2024: to add $95 million worth of buidl tokens as reserves for its tokenized fund product OUSG.

This decision addressed a pain point for OUSG users—T+2 redemption delays common in traditional funds. By combining Circle’s USDC liquidity pool with buidl’s instant settlement capability, ONDO achieved 24/7/365 instant subscription and redemption. This marks the first large-scale adoption of buidl in DeFi, accelerating the maturity of the RWA ecosystem.

Imagination Space for Institutional-Grade Collateral Layer

buidl’s potential extends far beyond the label of “stablecoin.” From Securitize CEO Carlos Domingo’s perspective, buidl is building an institutional-grade collateral layer for crypto assets.

Use Case 1: Capital Allocation for Web3 Projects

Web3 projects that have secured large funding rounds often hold hundreds of millions of dollars in stablecoins. Their core problem is: how to efficiently allocate and safeguard these funds? Previously, options were limited—either keep them on centralized exchanges (risky) or hold them privately (low yield).

Now, with buidl, these projects can convert off-chain USD into on-chain buidl tokens with a single click, gaining security comparable to U.S. Treasuries and yields close to 5% annualized (currently). The market size is expected to reach tens of billions of dollars.

Use Case 2: Credit Enhancement for Stablecoin Issuers

Tether (USDT), the largest stablecoin, has long faced questions about “opaque underlying assets.” If Tether can allocate most of its reserves into buidl managed by BlackRock, the problem is solved—Tether’s underlying assets are no longer a black box but managed by the world’s largest asset manager, BlackRock.

Circle itself is a partner of buidl, with USDC’s underlying assets managed by BlackRock. Emerging stablecoin projects like Mountain Protocol are also planning buidl allocations. The market size is expected to reach hundreds of billions of dollars.

Use Case 3: Large-Scale Application of Interest-Bearing Stablecoins

Current stablecoins like USDC and USDT do not generate interest. What if interest-bearing buidl is used to encapsulate these stablecoins, creating a new generation of interest-yielding stablecoins?

ONDO Finance’s USDY project is already experimenting with this. Using buidl as the underlying asset, deploying interest-bearing stablecoins on multiple chains like Aptos and Solana. The potential is huge—the stablecoin market itself is worth hundreds of billions of dollars, most of which are “zero-yield.”

buidl Opens a New Era of Composability in DeFi

In the case of MakerDAO, to gain exposure to BlackRock’s U.S. Treasury ETF, the project spent over $1 million building complex procurement and custody pathways. Now, the same requirement can be met simply by opening a qualified investor account on Securitize.

This seemingly simplified process actually signifies a deeper transformation: RWA assets are becoming native components of DeFi.

buidl is not just a product of BlackRock; it functions more like an “adapter” between traditional finance and crypto finance. Through buidl as an interface, DeFi protocols can directly access institutional-level U.S. Treasury exposure without understanding the complexities of traditional finance. This opens a whole new dimension for DeFi composability.

Imagine a future scenario: DeFi lending protocols use buidl as collateral, offering yields comparable to U.S. Treasuries; on-chain fund products use buidl as a core position, providing users with “on-chain U.S. Treasury funds”; cross-chain bridges enable buidl to flow across multiple chains, becoming a universal settlement tool in the DeFi ecosystem.

These are not fantasies. Based on buidl’s existing features—24/7 instant settlement, institutional-grade security, interest yields—these applications are all achievable.

The Blockchain Rebuilding of the Financial System Has Begun

BlackRock CEO Larry Fink has long stated that asset tokenization will be BlackRock’s next strategic direction. His vision is that “every stock and bond will be recorded on a single ledger.”

Although Franklin Templeton launched tokenized funds on public blockchains earlier, the entry of this financial giant creates a shockwave of a completely different magnitude.

More importantly, Circle’s provision of USDC liquidity pools for buidl opens the door for DeFi composability. This makes buidl not just a “financial product,” but the infrastructure for the entire RWA ecosystem—secure, efficient, trustworthy, interest-earning.

Returning to the BIS (Bank for International Settlements) recent publication “Finternet: The Future Financial System,” it states: “Although digital technology has changed how people live, much of the financial system remains stuck in the past. Many transactions still take days to complete, relying on time-consuming clearing and settlement systems. A blockchain-based Finternet will be the future of the financial system.”

The emergence of buidl is precisely a sign that this future is gradually becoming reality.