On Wednesday, BlackRock, the world’s largest asset manager, successfully acquired municipal debt through an exclusive blockchain technology. According to a Bloomberg report, this marks the first example of municipal bonds being purchased, settled, and stored entirely on a blockchain platform.
BlackRock’s Historic Bond Deal
According to the reportbonds issued earlier this year by the city of Quincy, Massachusetts, and underwritten by JPMorgan Chase & Co.
The transaction is facilitated through an application on JPMorgan’s private, blockchain-permitted platform, known as the Digital Debt Service. Interestingly, this method does not only reverse bond issuance process but also improves transparency and security of municipal finances.
BlackRock’s acquisition was made through its exchange-traded fund, the iShares Short Maturity Municipal Bond Active ETF (MEAR). Since its inception in 2015, MEAR has attracted approximately $750 million in client assets.
As part of the landmark deal, BlackRock replaced $6.5 million in Quincy’s bonds, according to data compiled by Bloomberg. Pat Haskell, head of BlackRock’s municipal bond group, expressed optimism about the transaction, saying:
The use of blockchain throughout the life cycle of bonds is one example of the power of this technology to transform financial markets. This transaction marks an important moment in the municipal bond market and is a testament to BlackRock’s commitment to innovation.
MEAR’s prospectus was recently updated to allow the fund to invest in municipal bonds paid for through JPMorgan’s blockchain application, according to a filing with the US Securities and Exchange Commission dated December 17.
However, investors are warned of potential risks, including shortages the economy and the possibility of errors or limitations in the computer code underlying the application.
In recent years, several issuers and underwriters have explored the feasibility of blockchain technology in the municipal bond market.
Notably, the board of trustees at Michigan State University considered a deal that would have used a proprietary digital asset platform developed by Goldman Sachs, highlighting the growing interest in integrating blockchain solutions within traditional finance.
iShares Bitcoin Trust Raises $60 Billion
In the field of cryptocurrency exchange-traded funds (ETFs), BlackRock has received significant attention, mainly due to steady inflows throughout the year. Notably, its iShares Bitcoin Trust (IBIT) outperformed its gold ETF in terms assets under management (AUM).
According to Ki Young Ju, CEO of market intelligence firm CryptoQuant, it took 20 years of BlackRock gold to get the ETF to $33 billion in AUM. In contrast, the Bitcoin ETF nearly doubled that amount in less than a year, approaching $60 billion.
This development comes amid significant volatility in Bitcoin’s price over the past 48 hours, as traders await the US Federal Reserve’s decision reduction of interest rate. During this time, despite Bitcoin briefly falling below the 100,000 mark, BlackRock seized the opportunity to buy $1 billion worth of Bitcoin.
At the time of writing, despite losing the $100,000 milestone, Bitcoin managed to recover this level and is currently trading at $101,240. However, the market-leading crypto still posted a loss of 2.3% in a 24-hour period.
Featured image from DALL-E, chart from TradingView.com
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