On Wednesday, BlackRock, the world’s largest asset manager, successfully acquired municipal debt through a transaction using exclusively blockchain technology. According to a Bloomberg report, this is the first instance where municipal bonds are purchased, settled and held entirely on a blockchain platform.
BlackRock’s historic bond deal
According to the reportThe bonds were issued earlier this year by the city of Quincy, Massachusetts, and were underwritten by JPMorgan Chase & Co.
The transaction was facilitated through an application on JPMorgan’s private and permissioned blockchain platform, known as Digital Debt Service. Interestingly, this approach not only streamlines bond issue process, but also improves the transparency and security of municipal finances.
The BlackRock acquisition was made through its actively managed 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 took a total position of $6.5 million in Quincy 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 bond lifecycle is just one example of the technology’s potential to transform capital markets. This transaction marks an important moment for the municipal bond market and demonstrates BlackRock’s commitment to innovation.
MEAR’s prospectus was recently updated to allow the fund to invest in municipal bonds settled through JPMorgan’s blockchain application, as noted in a filing with the U.S. Securities and Exchange Commission dated December 17.
However, investors are cautioned about potential risks, including lack of liquidity and the possibility of errors or limitations inherent in the underlying computer code of the application.
In recent years, several issuers and underwriters have explored the feasibility of blockchain technology in the municipal bond market.
Notably, the Michigan State University Board of Trustees considered a deal that would have used a proprietary digital asset platform developed by Goldman Sachs, highlighting growing interest in integrating blockchain solutions into traditional finance.
iShares Bitcoin Trust Reaches $60 Billion
In the cryptocurrency exchange-traded fund (ETF) space, BlackRock has received considerable attention, particularly due to continued inflows throughout the year. Notably, its iShares Bitcoin Trust (IBIT) outperformed its gold ETF in terms of assets under management (AUM).
According to Ki Young Ju, CEO of market intelligence firm CryptoQuant, it took BlackRock’s gold ETF 20 years to reach $33 billion in assets under management. In contrast, the Bitcoin ETF has nearly doubled that figure in less than a year, approaching the $60 billion mark.
This development comes amid notable volatility in the price of Bitcoin over the past 48 hours, as traders anticipated the US Federal Reserve’s decision on interest rate cuts. During this period, although Bitcoin briefly fell below $100,000, BlackRock took the opportunity to purchase $1 billion worth of Bitcoin.
At the time of writing, despite losing the key $100,000 milestone, Bitcoin has managed to regain this level and is currently trading at $101,240. However, the market-leading crypto still recorded losses of 2.3% over a 24-hour period.
Featured image of DALL-E, chart by TradingView.com
