The Ethereum-based ERC-20 token representing BlackRock ETF can swap against the shares of top tech companies like Apple, Alphabet, Microsoft, Amazon, and 496 others.
The integration of real-world assets into decentralized finance (DeFi) is getting real every single day and is one of the most sought-after narratives this year in 2023. Switzerland-based crypto startup Backed Finance is looking to soak up the interest. Last week, Backed Finance launched a tokenized version of a BlackRock ETF (CSPX) which includes names of tech heavyweights like Microsoft, Apple, Alphabet, Amazon, and a total of 496 other US conglomerates.
Dubbed bCSPX, the token runs on the Ethereum blockchain as an ERC-20 token. Each bCSPX is backed 1:1 by the shares of these stocks and Backed added that the shares are held by a licensed custodian.
Since the bCSPX token runs on the Ethereum blockchain, it can hypothetically interact with the whole host of DeFi applications. This could unlock other innovative ideas like minting MakerDAO’s decentralized stablecoin DAI while using the stock index as collateral.
As per reports, Backed Finance won’t be limiting this functionality only to S&P 500. As per the project’s marketing materials, the startup’s goal is to onboard additional public securities using a regulatory framework derived from Switzerland’s Distributed Ledger Technology act.
Three different categories of users can get hold of these tokens. The first involves exchange platforms and professional investors willing to offer the BlackRock ETF token to their clients. Similarly, the second category involves KYC’d token owners interested in redeeming the underlying asset. The third is for everyone else.
Interestingly, Backed Finance decided that the bCSPX token won’t be available in the US. This is also to avoid any sort of regulatory scrutiny from the SEC.
Backed Finance also faced challenges and other hurdles in their pathway. Uniswap pool had initially launched this tokenized product while seeding enough liquidity to get started with trading the bCSPX token.
However, Uniswap‘s interface now indicates that the new token from Backed Finance is “unsupported”. It “may not work well with the smart contracts or we [Uniswap] are unable to allow trading for legal reasons,” added Uniswap.
This may not be a huge concern as of now. As such American citizens don’t have access to this product. But unfortunately, American traders won’t enjoy the speedy swaps between Apple’s stock and Circle’s USDC. If assets like the bCSPX token get integrated with other DeFi apps, Americans could get the feeling of being left behind.
Last December 2022, BlackRock CEO Larry Fink talked about the tokenization of securities. “The next generation for markets, the next generation for securities, will be tokenization of securities,” he added.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
