BlackRock’s iShares ETF Makes History with Unique Blockchain-Backed Municipal Debt Deal

On Wednesday, BlackRock, the world’s largest asset manager, successfully acquired municipal debt through a transaction that exclusively utilizes blockchain technology. According to a Bloomberg report, this marks the first instance of municipal bonds being purchased, settled, and held entirely on a blockchain platform.

BlackRock’s Historic Bond Deal

Per the report, the 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, permissioned blockchain platform, known as Digital Debt Service. Interestingly, this approach not only streamlines the bond issuance process but also enhances transparency and security in municipal finance.

BlackRock’s 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 this historic deal, BlackRock has taken a total position of $6.5 million in the Quincy bonds, according to data compiled by Bloomberg. Pat Haskell, head of BlackRock’s municipal bond group, expressed optimism about the transaction, stating: 

The use of blockchain throughout the lifecycle of bonds is just one example of the potential for this technology to transform capital markets. This transaction marks a significant moment for the municipal bond market and is a testament to BlackRock’s dedication to innovation.

The prospectus for MEAR was recently updated to permit the fund to invest in municipal bonds settled through JPMorgan’s blockchain application, as indicated in a filing with the US 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 board of trustees at Michigan State University considered a deal that would have utilized a proprietary digital assets platform developed by Goldman Sachs, highlighting a growing interest in integrating blockchain solutions within traditional finance.

iShares Bitcoin Trust Surges Towards $60 Billion

In the realm of cryptocurrency exchange-traded funds (ETFs), BlackRock has garnered significant attention, particularly due to ongoing inflows throughout the year. Notably, its iShares Bitcoin Trust (IBIT) has outperformed its gold ETF in terms of assets under management (AUM).

According to Ki Young Ju, CEO of the market intelligence firm CryptoQuant, it took BlackRock’s gold ETF 20 years to reach $33 billion in AUM. In contrast, the Bitcoin ETF has nearly doubled that figure in less than a year, approaching the $60 billion milestone.

This development occurs amid notable volatility in Bitcoin’s price over the past 48 hours, as traders anticipated the US Federal Reserve’s decision on interest rate cuts. During this period, despite Bitcoin briefly falling below the $100,000 mark, BlackRock seized 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 recover this level and is currently trading at $101,240. However, the market’s leading crypto still posted losses of 2.3% in the 24-hour time frame.

Featured image from DALL-E, chart from TradingView.com