BlackRock ETF Invests in Blockchain-based Municipal Debt
BlackRock ETF Makes History in Blockchain-Based Muni Debt Purchase
BlackRock Inc., the world’s largest asset manager, made headlines recently as it became the first investor to purchase a piece of a unique municipal bond issuance using blockchain technology.
The ETF responsible for this historic purchase is the iShares Short Maturity Municipal Bond Active ETF (MEAR), an actively-managed exchange-traded fund established in 2015 with around $750 million in client assets.
This groundbreaking deal involved municipal debt issued by the city of Quincy, Massachusetts, earlier this year. JPMorgan Chase & Co. served as the underwriter and utilized its private, permissioned blockchain-based platform to facilitate the sale. This transaction marked the first time that muni bonds were bought, settled, and held entirely on a blockchain platform.
BlackRock acquired a portion of these bonds, holding a total position of $6.5 million in the Quincy deal through its ETF, as reported by Bloomberg.
Pat Haskell, the head of the municipal bond group at BlackRock, emphasized the significant impact of blockchain on transforming capital markets. He described this moment as a testament to BlackRock’s commitment to innovation and the potential for blockchain technology to revolutionize the bond market.
To enable investment in blockchain-based muni bonds, the prospectus for MEAR was updated to include provisions for using JPMorgan’s Digital Debt Service application. Notably, risks associated with this investment include liquidity concerns and the possibility of errors, bugs, or limitations in the application’s underlying code.
While BlackRock is leading the way in adopting blockchain technology for municipal debt, other entities have also been exploring similar initiatives. For instance, the Michigan State University board of trustees was considering a bond deal that would have leveraged a digital assets platform provided by Goldman Sachs.
The adoption of blockchain in the municipal bond market represents a significant step forward in embracing technological advancements. As more investors and issuers recognize the benefits of blockchain, we can expect to see continued evolution and innovation in the financial industry.
