A week ago BlackRock unveiled its BlackRock USD Institutional Digital Liquidity Fund (BUIDL), a money market fund that aims to offer a stable $1 value. One week on, BUIDL has attracted $245 million in assets from seven investors. Ondo Finance, which previously tokenized BlackRock ETF funds, has shifted $95 million into the BUIDL fund and makes up 38% of its value.
Two other investors have $50 million a piece, one has $35 million and four have $5 million.
While BlackRock looks like competition for Ondo Finance, the move probably makes sense for both parties. Previously, if someone wanted to redeem the Ondo tokenized money market fund (OUSG) they had to wait because traditional securities settlement takes two days. With the latest move, Ondo says it will soon be able to offer instant investment and redemption 24/7/365.
In theory BlackRock and Ondo have slightly different target markets. BlackRock’s minimum investment is $5 million whereas Ondo’s OUSG has a $100,000 minimum. Just as importantly, it provides peace of mind for Ondo investors as they can see the BlackRock BUIDL investment on-chain.
That said, Ondo has 42 token holders, six of whom have balances of more than $5 million. One wallet with $14 million is part of Ondo’s DeFi protocol, Flux Finance. The remaining five whale wallets amount to $60 million of Ondo’s almost $95 million fund or just under two thirds of OUSG.
In other words, those five holders theoretically could invest in BUIDL directly, although Ondo’s OUSG is open to global investors. In contrast, BUIDL is a Rule 506c issuance, which restricts it to U.S. accredited investors.
BlackRock’s BUIDL is also possibly competition for Franklin Templeton’s FOBXX digital money market fund. It took FOBXX two years to reach $270 million in assets under management (AUM). It now has $358 million in AUM and around 385 investors. It’s somewhat different from BUIDL because FOBXX is a 1940 Act fund, like ETFs, so it’s retail-oriented with fewer investor restrictions compared to BUIDL.
While there’s quite a bit of fuss about tokenized money market funds surpassing $1 bilion, it’s worth putting that in context. BlackRock’s largest money market fund is worth more than $125 billion. Its top ten money market funds (excluding the Circle Reserve fund) are worth more than $445 billion. A billion is still a substantial figure. As they say, mighty oaks grow from little acorns.
