Emily Walker
On Wednesday, BlackRock, the leading asset management firm globally, completed its acquisition of municipal debt utilizing blockchain technology for the entire process. A report from Bloomberg highlighted that this is the first occasion where municipal bonds have been issued, settled, and maintained entirely on a blockchain network.
Historic Municipal Bond Acquisition by BlackRock
According to the report, the bonds were issued by Quincy, Massachusetts, earlier this year and were underwritten by JPMorgan Chase & Co.
The transaction was executed using JPMorgan’s private blockchain platform, Digital Debt Service. This innovative method not only simplifies the bond issuance process but also improves transparency and security in municipal finance.
The acquisition was made via BlackRock’s iShares Short Maturity Municipal Bond Active ETF (MEAR), which has attracted nearly $750 million in assets since its launch in 2015.
Details show BlackRock has invested a total of $6.5 million in bonds from Quincy, according to Bloomberg’s findings. Pat Haskell, the head of BlackRock’s municipal bond group, conveyed optimism about this transaction, stating:
The application of blockchain throughout the bond lifecycle exemplifies the technology’s potential to revolutionize capital markets. This event is a key milestone for the municipal bond sector and reflects BlackRock’s commitment to innovation.
The prospectus for MEAR has recently been amended to allow investments in municipal bonds settled via JPMorgan’s blockchain system, as noted in a US Securities and Exchange Commission filing dated December 17.
Nevertheless, investors should be aware of potential risks, such as limited liquidity and possible errors or constraints in the underlying technology.
In recent times, various issuers and underwriters have been investigating how blockchain could be incorporated into the municipal bond market.
For example, Michigan State University’s board of trustees considered a deal using a digital assets platform developed by Goldman Sachs, showcasing a growing trend toward blockchain integration in traditional finance.
Rapid Growth of iShares Bitcoin Trust
In the cryptocurrency ETF sector, BlackRock is gaining notable recognition, particularly for its continuous inflow of investments this year. Its iShares Bitcoin Trust (IBIT) has overtaken its gold ETF in terms of assets under management (AUM).
As reported by Ki Young Ju, CEO of CryptoQuant, BlackRock’s gold ETF took 20 years to reach $33 billion in AUM. In comparison, the Bitcoin ETF has nearly doubled that figure in under a year, nearing $60 billion.
This increase in AUM comes during a period of significant Bitcoin price fluctuations, as traders awaited the US Federal Reserve’s interest rate decisions. Despite Bitcoin dipping below $100,000 temporarily, BlackRock took the opportunity to acquire $1 billion in Bitcoin.
At the time of this writing, Bitcoin has managed to reclaim the $100,000 level, currently trading at $101,240, despite recording a 2.3% loss in the past 24 hours.
Image provided by DALL-E; chart sourced from TradingView.com