BlackRock's tokenized fund. Plus MakerDao's yield and getting "dusted."

Today's newsletter is 1,100 words, a 4-minute read.

👀 1 big thing: BlackRock's tokenized fund

Illustration: Sarah Grillo/Axios

BlackRock put a painfully traditional fund on the Ethereum blockchain last week, Crystal writes.

Why it matters: It's another step toward the "technological revolution" that started with ETFs and will eventually lead to the "tokenization of every financial asset," per Larry Fink, chief of the world's largest asset manager.

  • Tokenization is the process of making real-world assets — stocks, bonds, real estate or whatever else — accessible on blockchains.

The big picture: The technology to do it has existed for years, but the crypto industry's efforts to put it in action have been stymied by a combination of regulators, incumbent market participants and the so-called degens who'd rather trade something else.

BlackRock's tokenized money market fund is one more effort in bridging traditional finance with decentralized finance (DeFi), but it isn't stepping into that in-between in a "move fast, break things" way.

  • It's partnered with Securitize, a platform that aims to deliver private market alternative assets in a regulatorily compliant way.

How it works: The BlackRock USD Institutional Digital Liquidity Fund, or BUIDL, seeks to offer a stable value of $1 per token and pays accrued dividends in tokens.

  • "We're doing faster issuance and redemption. We allow peer-to-peer transfers across whitelisted wallets," Securitize CEO Carlos Domingo tells Axios.

If a holder loses access to those BUIDL tokens, for whatever reason, there are guardrails in place — they can call up the transfer agent, or in this case Securitize, and start a process for those tokens to be burned and reissued, Domingo said.

  • "Things happen, but for the most part, this is in control."

Caveat: BUIDL's not available to just anyone, only qualified purchasers. That's institutions with at least $25 million in investable assets, who can sign up with Securitize with a minimum $5 million investment.

  • The fund, which already has some $100 million in assets under management, won't be on any of the usual DeFi protocols, for now — those venues are permissionless and anonymous, "they're not suitable for securities," Domingo said.

Flashback: BlackRock isn't the only one that has tokenized funds or used blockchain for secondary recordkeeping. Others include Franklin Templeton and WisdomTree, and on the crypto-native side, Robert Leshner's Superstate and Nathan Allman's Ondo Finance.

Reality check: The blockades for that grand vision of an everything-tokenized future are several, a person close to the matter tells Axios, but chief among them are regulators.

  • "The SEC has not approved the use of the public blockchain for anything. The only place where that's been allowed so far is in private securities."
  • "Public securities are a different beast," Securitize's Domingo says. "What we do is primarily private securities, or registered non-national market securities, which have a slightly simpler regulatory regime."

The bottom line: "We have just proven that we can actually do it in legal way with BlackRock," he said.

😖 2. MakerDAO ramps up yield as market turns bullish

Data: CoinGecko; Chart: Axios Visuals
Data: CoinGecko; Chart: Axios Visuals

MakerDAO, sometimes called the central bank of Ethereum, dramatically upped its yield to users as the market turned bullish earlier this month, Brady writes.

Why it matters: It's a sign that market-beating returns are coming back to decentralized finance (DeFi).

  • Returns on holding dai (DAI), the stablecoin (which aims for low volatility around $1 each) minted by MakerDAO via loans, are seen as one of the most conservative sources of yield in DeFi.
  • Of note: All yields in DeFi are riskier than truly conservative, time-tested investments elsewhere.

What happened: The market cap of dai plunged suddenly in early March, alarming leadership at MakerDAO.

  • A post-mortem describes how most of the drop came from just a couple of holders, presumably exiting the modest yields in dai for greener pastures as much higher rates could be found elsewhere.
  • A proposal was made to dramatically increase the yields on deposits into MakerDAO, most notably raising yields on dai from 5% to 15%.

What they're saying: "Let me provide my input as a user with significant debt in DAI. Raising the rate that fast and that much [leaves] a bitter taste in my mouth and shakes my confidence in the project," BlueCat wrote in the MakerDAO forum.

Flashback: Borrowers have been here before. In its very early days, users could borrow dai for a measly 0.5%. But as DeFi started to really kick in and become a market, those rates became unsustainable.

By the numbers: The market cap of dai has since recovered from about $4.4 billion to around $4.7 billion today. Still about $300 million off from a month ago, but it shows the market responded to the update.

  • The cost to borrow dai was also stepped up, though the rate doesn't leave much wiggle room. It can be borrowed now for 16% interest.

In the weeds: Dai is a more decentralized stablecoin than something like usd coin (USD coin). It's largely the product of loans made against assets, but it has had to make compromises on its model to weather volatility.

  • Further, it went deeply into U.S. Treasuries last year, which is what enabled it to offer a 5% savings rate on dai when DeFi was moribund.

What we're watching: Leadership at the DAO plans to propose updates to its governance models so these changes will be less disruptive.

📢 3. Catch up quick

Illustration: Shoshana Gordon/Axios

💸 The SEC is seeking a $1.95 billion fine in the Ripple case. (CoinDesk)

👤 WikiLeaks founder Julian Assange will not immediately be extradited. He could be allowed to pursue an appeal in a U.K. court absent certain assurances from the United States. (AP)

👩‍⚖️ The SEC's case against Terraform Labs and its founder Do Kwon started in New York without him. (Wall Street Journal)

🧹 4. Culture hash: Getting dusted

Screenshot: @iamDCinvestor (social media)

Big asset managers embracing blockchain means putting up with crypto shenanigans, Crystal writes.

Flashback: When Bitwise Asset Management published the wallet address for its spot bitcoin ETF, it received all manner of things from the crypto community — fun and cute.

Behind the scenes: Recently, a wallet not owned by BlackRock, but associated with the one for BlackRock's BUIDL fund, was sent ETH from Tornado Cash, a sanctioned privacy tool.

  • 👆 For a moment, though, Crypto Twitter goss was running hot on the idea of a big-time asset manager "getting dusted."

Context: "Dusting" is when small amounts of cryptocurrency are sent to a bunch of wallet addresses, a strategy some cybercriminals use to uncover the identity of the wallet's owner.

  • 👉 Securitize's Domingo says dusting can "make a wallet appear dirty" and that "it is unavoidable that people will send all this crap."

The bottom line: The Treasury Department's Office of Foreign Assets Control is well aware of dusting and has published a bulletin on it.

This newsletter was edited by Pete Gannon and copy edited by Carolyn DiPaolo.

Crystal's off to BUIDL Asia in Seoul 🇰🇷. Say, "annyeong" 👋 if you're there! —B & C