When you buy a stock or a bond, do you know which database that transaction is running on?

I’m sure the answer is no, but the database will change & that has far-reaching implications.

data via Allium

Blackrock’s tokenized Treasury fund, BUIDL, has amassed $2b of treasuries so far, with a recent significant surge. This fund is still a bit smaller than BlackRock’s classic Treasury Fund BYTXX at $21b.

Tokenized assets, stocks and bonds on blockchains, are at just the beginning. Larry Fink, CEO of BlackRock, said :

“Every stock, every bond, every fund — every asset — can be tokenized,” Fink said. “If they are, it will revolutionize investing. Markets wouldn’t need to close. Transactions that currently take days would clear in seconds. And billions of dollars currently immobilized by settlement delays could be reinvested immediately back into the economy, generating more growth.”

Why benefits does tokenization provide an investor?

If I buy a share in the standard Treasury fund, I receive my interest every month. If I buy the same Treasury through BUIDL, I receive the interest every day. When I sell BUIDL, I receive my proceeds immediately. I can pledge my Treasuries and borrow against them as collateral to invest or buy a house.

While treasuries represent the first major success in tokenization, the potential transformation extends into stocks. Stocks haven’t been tokenized at any meaningful scale yet. Coinbase is rumored to be exploring this.

Setting aside regulatory concerns, most of the mechanisms necessary to tokenize stocks exist : owning a token empowers a shareholder to vote ; dividends are distributed in-kind (which also occurs in classic equities markets). One wrinkle is that most equities don’t trade across venues : buying Google stock is limited to one exchange.

Should tokenized equities become normalized especially with a more crypto friendly SEC, provide a pathway for startups to go public with far less regulatory overhead, a fraction of the $15-25m in costs, and with a much broader reach of potential investors because token markets are global.

The database that records your financial transactions might seem like an invisible technical detail, but as assets move to blockchain databases, the implications for investors, startups, & the entire financial system will be profound & hugely positive.