From theblock by Daniel Kuhn

Securitize Credit is partnering with digital asset trading firm QCP on a strategy incorporating the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) into Securitize’s yield-generating strategies.

The partnership involves Securitize Credit entering into a basis trade with QCP, using the tokenized BUIDL fund as collateral. This marks the first derivatives trade backed by BlackRock’s onchain fund as collateral, according to a press release Thursday.

The bitcoin-based basis trade — also called a cash-and-carry trade — is apparently earning Securitize 20.71% returns per annum. 

Cash-and-carry trades have become a common trading strategy across the crypto industry, used by protocols like Ethena and SuperState as well as traders looking to eke out arbitrage opportunities between spot and futures prices of crypto assets. 

A typical basis trade in crypto involves buying an asset in the spot market and simultaneously shorting the same asset in the futures market. This allows investors to pocket the difference between the spot and futures prices as the “basis” narrows because prices typically converge as the futures contract expires.

According to the press release, Securitize previously collateralized its six-month bitcoin-based basis trade using stablecoins, earning the company approximately 11.95% per annum. 

By swapping out stablecoins for BUIDL, Securitize is still earning 10.78% per annum (i.e. the profit from buying spot  BTC +1.85%

and shorting bitcoin futures), but is also earning the 4.25% annualized yield native to the BUIDL fund. 

Additionally, the firm was able to sell an additional $50,000 strike bitcoin puts against its position, to earn an additional 3.6%, because of “BUIDL’s high-quality, minimal risk standing in the marketplace.”

“Trades collateralized with stablecoins or dollars yield less than those using BUIDL. This is because investors retain the yield delivered by BUIDL, allowing for compounded returns,” the firm explained. 

BUIDL, launched in March 2024 through Securitize Markets, is the largest tokenized fund, surpassing a market capitalization of over $650 billion. The BUIDL token is backed by short-term U.S. government debt and is pegged to the dollar. 

Institutions and protocols use the token to earn yields on their treasuries, collateralize trades and build derivative products on top of it. Launched initially on Ethereum, the BUIDL token is now available on Aptos, Arbitrum, Avalanche, Optimism's OP Mainnet and Polygon.

Tokenization is one of the fastest-growing crypto subsector trends. The thesis is that putting “real-world assets” — like government bonds, private credit funds or other assets — onchain can lead to faster settlements and greater transparency. 

QCP, founded in 2017 and headquartered in Singapore, is a leading wealth partner in digital asset strategies. Last year, it partnered with Hashnote to enable clients to use Hashnote’s USYC as collateral for QCP investment products. The firm is reportedly exploring using BUIDL in its interest rate swap products.

BlackRock is a financial backer of Securitize.

Editor's note: Updates figures in the headline and body with more recent data.