"There are bound to be questions", confides a French banker following BlackRock's launch on 21 March of BUIDL (BlackRock USD Institutional Digital Liquidity Fund), a money market fund tokenised on the Ethereum blockchain that managed to raise nearly $280 million in just a few days.
A major European bank confided that this information had triggered "internal tensions" over the strategy to be adopted for the future. But in reality, this state of mind is present among a great many players in Europe. "We have the impression that Europe is going to miss the boat, even though we were off to a very good start", another banking source tells The Big Whale. "BlackRock has just slapped us in the face and I hope that will push us to speed up," she huffs.
👉 Europe at the forefront of tokenisation issues
Historically, Europe has been the most advanced player on the subject for years. As early as 2016 and the release of the ERC-20 standard (fungible tokens) on Ethereum, start-ups such as Tokeny (2017), Kriptown (2018) and Equisafe (2019), as well as major banks such as Société Générale, have been working on the tokenisation of financial products, i.e. their digital representation on blockchain.
Some remarkable experiments have even taken place, notably that of SG-Forge, the subsidiary of the Société Générale group, with an ambitious refinancing operation carried out with MakerDAO , one of the leading decentralised finance protocols (DeFi) in January 2023.
At the time, the subsidiary's CEO, Jean-Marc Stenger, was pleased with an operation that was more "a legal innovation than a technical one. By carrying it out, we wanted to show that it was possible for a traditional player to deal securely with a decentralised finance protocol while controlling all the risks", he explained.
A few weeks later, Forge even launched its stablecoin , CoinVertible (EURCV), with a listing on the Bitstamp exchange platform, one of the most regulated in Europe. Not to mention the issue of a €10 million green bond on the Ethereum blockchain at the end of 2023.
So many advances that have marked the institutional development of digital assets in Europe, but no match for BlackRock's fund, which was immediately the subject of numerous requests (such as from Ondo Finance, whose analysis , which immediately subscribed for $95 million).
👉 Less risk appetite than in the US
"In Europe, banks have a greater distribution role than in the US," explains Luc Falempin, CEO of Tokeny, a company specialising in asset tokenisation. "They are much more sensitive to reputational risk, which may explain a certain conservatism on the subject", he explains.
"Asset managers like BlackRock are not afraid of losing large clients such as major industrial companies or sovereign wealth funds, so it's much easier for them to innovate", confides Guillaume Burtschell, associate director at Finegan Advisory and who has notably spent time at Société Générale and Binance France.
This reputational risk, which can be explained by the poor image of cryptos, would justify why experimentation with private blockchains has long been the norm among Europe's major financial institutions.
"For the major European banks, the temptation is inevitably great to recreate a closed market infrastructure that they would share. In this scenario, they would be able to control all the flows, which would be much more reassuring for them," continues Guillaume Burtschell.
In fact, many dread the opportunity to launch themselves into totally open and public environments. Yet this is where the real innovation lies.
"Yet there are solutions for getting within the regulatory bounds, even via a public blockchain like Ethereum," laments Luc Falempin, whose company is notably behind the token ERC-3643 , a fungible token standard on Ethereum that allows various regulatory elements to be incorporated, such as the identity of an investor.
Another example demonstrates the difference in approach between Europe and the United States. While there have been crypto ETPs in Europe since 2015 , their US equivalents (ETFs) have been much more successful in less than three months of existence.
One of the main reasons? The refusal of banks and insurers in certain countries (notably France) to make this type of product accessible. "In Europe, in our opinion, there is a more limited appetite for 'crypto' risk on the part of large financial companies," David Durouchoux, deputy managing director at SG-Forge, tells The Big Whale.
👉 A lack of collaboration with crypto players
As Sébastien Dérivaux, working at MakerDAO at the time of the refinancing deal between the protocol and SG-Forge, pointed out to The Big Whale, BlackRock's tokenised money fund isn't all that innovative, but it does stand out for having managed to get an entire ecosystem on board in its wake.
The American asset manager has relied on a number of major players from both the traditional and crypto worlds to make its product work. Its team includes US bank BNY Mellon, tokenisation platform Securitize and exchange platform Coinbase.
"This collaboration between the traditional and crypto worlds is globally what's missing in Europe. It's a major brake on the development of tokenisation. Today, most of my customers are American or Asian and not European," laments Luc Falempin, whose company is based in Luxembourg.
"Particularly since the FTX scandal or the fall of Terra-Luna, bank management has been particularly reticent about working with crypto players. But it's also true to say that it's a sector that the banking world's top executives are still unfamiliar with," analyses Guillaume Burtschell.
👉 Things will get moving in the coming months
So, is the delay definitive? Several fund tokenisation projects have been in the pipeline for several months. BlackRock's announcement has accelerated the process. Numerous offers will be launched shortly. "It's a matter of weeks," confides Matthieu Lucchesi, a lawyer with Gide who provides legal support for several tokenisation projects.
"While BlackRock's product is operational, it should still be remembered that for the time being it remains an experiment that has yet to prove itself", confides a lawyer in the sector who is assisting several European banks with tokenisation projects.
For David Durouchoux, the size of the American players enables them to invest more massively in these innovation subjects. "We have observed a gap of 1 to 3, or even 10, between the size of the teams at European financial firms and American firms. It's a gap that can still be made up if Europeans decide to work together, and that's why we don't think Europe is lagging behind," he concludes.
