BlackRock is aiming to integrate its digital money-market token, BUIDL, as collateral in cryptocurrency derivatives trades. Sources indicate that the company is currently in discussions with prominent crypto exchanges such as Binance, OKX, and Deribit.

Understanding BUIDL

BUIDL is a token specifically designed for qualified institutional investors, requiring a minimum investment of $5 million. This digital asset represents BlackRock’s USD Institutional Digital Liquidity Fund, a money-market fund that invests in U.S. Treasury bills, cash, and other secure financial instruments.

BUIDL stands out from traditional stablecoins like Tether’s USDT by offering interest payments to holders, making it potentially attractive to derivatives traders.

The Role of Crypto Derivatives

Crypto derivatives are financial contracts whose value is derived from cryptocurrency price movements. These contracts allow traders to speculate on the price of assets like Bitcoin without actually purchasing them. To engage in these trades, participants often need to provide collateral, typically in the form of stablecoins. Tether’s USDT is commonly used due to its stable value of $1, providing reliable security for trades.

BUIDL’s introduction into the derivatives market could challenge USDT’s dominance. BlackRock is optimistic that more platforms will accept BUIDL as collateral, potentially expanding its market reach significantly.

Early Adoption and Market Impact

Prime brokers like FalconX and Hidden Road already permit their clients to use BUIDL as collateral, and custodian Komainu has recently joined this list. These early adopters include hedge funds and other institutional investors.

According to research firm CCData, crypto derivatives trading accounted for over 70% of all crypto trading volume in September, with $3 trillion worth of contracts traded that month alone. This makes derivatives a substantial part of the crypto ecosystem. Should major exchanges like Binance and Deribit accept BUIDL, BlackRock could position itself as a significant player in this market.

“Crypto derivatives trading accounted for over 70% of all crypto trading volume in September, with $3 trillion worth of contracts traded that month alone.” – CCData

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