On March 21, 2024, BlackRock launched its first tokenized fund, the BUIDL token, on a public blockchain.  While this move marks a significant step in the tokenized securities space, BlackRock’s conservative approach limits many of the benefits of tokenization. Despite this, BlackRock's entry remains a positive development for the industry.

DSI's analysis of BlackRock's BUIDL fund can be found here: Is BlackRock's BUIDL fund a template for tokenized securities?

Right now we are in “starting up” mode which means we are somewhat chaotically exploring the situation and touching on many topics, rather than running coherent long-running research projects. We’ve been exploring differing opinions on KYC needs, learning about the security tokenization projects happening offshore, meeting with many people who have a policy role in the crypto space to see who might already have opinions worked out on these topics, getting informal feedback and suggestions from a few friendly folks at the SEC, and so on.

We’re thinking that upcoming research projects will include:

• Evaluating the effectiveness of AML in the traditional financial system and comparing that to the effectiveness of AML in the public blockchain ecosystem. We are genuinely uncertain which is better – many will claim strongly that one or the other is better, and we’d like to get to the bottom of this question as objectively as we can.
• Mapping out all types of objects in the DeFi ecosystem – wallets, AMMs, lending markets, derivatives products and DEXs, bridges, stablecoins, index products, staking providers, boost-as-a-service providers, vote bribing markets, and so on. And once the map exists, beginning to enumerate the main issues with each type in terms of consumer risk and systemic risks, as well as new types of benefits they offer.
• Searching through regulated entity types within the current securities market structure and comparing to their closest DeFi counterparts to see which regulations could be straightforwardly applied in a productive way, versus which would be awkward, unworkable, or unnecessary in the context of DeFi. And then for DeFi objects that have risks which don’t seem to be handled by porting over current regs, noting those and beginning to think about what approaches to regulation could be sensible.
• Articulating why DeFi-pilled people are so convinced that DeFi and tokenization is the future and that it would be good to have traditional assets transactable in DeFi, and then examining why critics think that’s not right and why it would be better to just keep things as they are in the current market structure, so that people with each view can be more fully understood by the other.

These projects (or whatever we refine them to be) will start in earnest as soon as we have full-time staff devoted to DSI. Currently Confusion Capital is seeking to fund two staff members full-time to focus on DSI. If you or someone you know would be a good fit to take on one of the projects above, please let us know.