The biggest asset manager in the world recently introduced its $100 million BlackRock USD Institutional Digital Liquidity Fund (BUIDL). This Ethereum-based investment vehicle by BlackRock has created quite a stir in the cryptocurrency market.
BlackRock’s Bitcoin ETF was a BIG Success!
This move follows BlackRock’s successful launch of a bitcoin ETF in early 2024. And, it keeps with CEO Larry Fink’s vision of tokenization as the future of finance. It signifies a deliberate shift towards decentralized finance (DeFi).
Unexpected Response from Crypto World
But, the crypto community reacted with an on-chain reaction powered by memes. This illuminated the complexities of combining traditional finance with the ever-changing crypto world.
With the launch of this fund in collaboration with Securitize, the investment behemoth takes a major leap into decentralized financing (DeFi).
image source: protos.com
A wallet connected with BlackRock’s new Ethereum-based investment fund received unwanted transactions, including ETH from the sanctioned crypto mixer Tornado Cash. This can lead to legal difficulties for the Behemoth asset manager.
About Tornado Cash
BlackRock’s wallet associated with the BUIDL fund received unsolicited transactions involving memecoins from the sanctioned Tornado Cash. These include NFTs, and 0.97 ETH.
Tornado Cash was sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) in Aug 2022 for allegedly aiding money laundering & ties to North Korea’s Lazarus Group. Therefore, the transfer from Tornado Cash could give rise to legal concerns.
According to reports, Tornado Cash developer Alexey Pertsev’s next trial in the Netherlands is expected to charge him with laundering $1.2 billion using the mixer.
What Now?
U.S. citizens and financial institutions must report such transactions to OFAC, including ETH from Tornado Cash.
The change brings to light the new risks that BlackRock can encounter in the DeFi industry.
BlackRock needs to proceed with prudence when utilizing DeFi projects. Constant phishing scams often drain consumers’ accounts. And, hacking is rampant in the industry.
Impending Security Concerns?
It is possible that for BlackRock, many new dangers may be lurking in the on-chain frontier of DeFi as it shifts capital away from conventional finance.
As per Charles Wang, the fund’s contract’ follows unproven implementation and oversimplified single-account ownership structure. This configuration exposes the fund to disastrous dangers, particularly in the event of a compromised private key for the external account.
