BlackRock ETF buys first Muni bonds issued via Blockchain

December 28, 2024

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BlackRock ETF buys first Muni bonds issued via Blockchain

(Bloomberg) — BlackRock Inc.’s fund bought… Municipal debt issued earlier this year in a first-of-its-kind deal based exclusively on blockchain technology.

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BlackRock bought the bonds through an actively managed exchange-traded fund called the iShares Short Maturity Municipal Bond Active ETF, or MEAR, according to a company spokesman. The fund was established in 2015 and has approximately $750 million in client assets.

The securities were issued by the city of Quincy, Massachusetts, in April, and insurer JPMorgan Chase & Co. used an application on its own blockchain-based platform to facilitate the sale. This was the first transaction in which Muni debt was purchased, settled and held all in the blockchain on the platform.

BlackRock is the first investor to buy part of the deal, the company said. The ETF lists its holdings including a total position of $6.5 million in the Quincy deal, according to data compiled by Bloomberg.

“Using blockchain throughout the bond lifecycle is just one example of the potential of this technology to transform capital markets,” said Pat Haskell, head of BlackRock’s municipal bonds group. “This transaction represents an important moment for the municipal bond market and is a testament to BlackRock’s dedication to innovation.”

MEAR’s prospectus has been updated to allow the fund to invest in municipal bonds settled based on JPMorgan’s digital debt service application, according to a Dec. 17 U.S. Securities and Exchange Commission filing. The risks disclosed to investors include lack of liquidity and the possibility of errors, bugs or limitations in the underlying computer code of the application.

A few issuers and insurers have tested the local market’s appetite for using blockchain technology in recent years. The Michigan State University Board of Trustees also considered a deal that could have been recorded on a private digital asset platform provided by Goldman Sachs.