One of the most sought-after tales for 2023 is incorporating real-world assets into DeFi, which is moving closer and closer to being a reality every day. Backed Finance, a crypto currency firm located in Switzerland, is hoping to capitalize on the current enthusiasm.
Backed Finance introduced (1) a tokenized version of a BlackRock exchange-traded fund (ETF) called CSPX. This ETF comprises 496 different US businesses and includes well-known brands in the technology industry, such as Microsoft, Apple, Alphabet, and Amazon.
BlackRock ETF Token
The token, given the name bCSPX, is an ERC-20 token based on the Ethereum network. Each bCSPX is supported by one share of each of these stocks on a one-to-one basis, and the term "backed" indicates that an authorized custodian keeps these shares.
Since the bCSPX token is based on Ethereum and operates on the blockchain, it can communicate with various DeFi apps. This may make it possible to implement additional ground-breaking concepts, such as minting MakerDAO's decentralized stablecoin DAI while utilizing the stock index as collateral.
According to rumors, Backed Finance will not restrict this capability to the S&P 500 alone in the future. According to the project's marketing materials, the firm's objective is to include new public securities by utilizing a regulatory framework drawn from the Distributed Ledger Technology statute in Switzerland.
These tokens are accessible to individuals who fall into three distinct groups. The first scenario involves exchange platforms and experienced investors who are prepared to make the BlackRock ETF token available to their customer base.
Like the first, the second group consists of KYC-verified token owners interested in redemption of the underlying security. The third is for all of the other people.
It is interesting to note that Backed Finance has determined the bCSPX token will not be made available in the United States. The SEC should not be subjected to regulatory scrutiny by doing this.
Getting Over the Obstacles of the Law
Backed Finance was also confronted with various difficulties and obstacles along the route. Uniswap pool first offered this tokenized product while seeding sufficient liquidity to sell the bCSPX token. bCSPX stands for basic crypto currency swap pool exchange.
On the other hand, the Uniswap interface now displays a message stating that the new token issued by Backed Finance is "unsupported." According to Uniswap, it "may not operate effectively with the smart contracts, or we [Uniswap] are not able to enable trade for legal reasons."
It's possible that this shouldn't cause too much anxiety right now. Because of this, those living in the United States cannot purchase this item. However, American traders will only be able to take advantage of the lightning-fast swaps available between Apple shares and Circle's USDC.
If assets such as the bCSPX token are combined with other DeFi apps, people in the United States may fall behind.
BlackRock's chief executive officer, Larry Fink, discussed the tokenization of several securities in December 2022. Tokenization of securities, he continued, will be "the next generation for marketplaces and the next age for securities."