There have been two recent major crypto developments from BlackRock, the world’s largest asset manager in the past couple of weeks.
In early August, cryptocurrency exchange Coinbase Global announced a partnership with BlackRock to extend the use of its Aladdin asset management software suite to institutional clients who also own digital assets through Coinbase.
BlackRock then confirmed on Aug. 11 it is setting set up a spot bitcoin trust for institutional clients in the U.S.
In his annual letter to shareholders in March, BlackRock CEO Larry Fink said BlackRock was studying digital currencies, stablecoins and the underlying technologies to understand how they can help the company serve its clients.
BlackRock’s recent moves further shows how traditional investment firms are increasingly coming to terms with cryptocurrency as an emerging asset class, also considering Fidelity Investments’ controversial April announcement that it would begin allowing 401k participants in plans recordkept by the company to invest part of their portfolio in bitcoin.
“Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets.”
BlackRock statement
While BlackRock has not been shouting these recent developments from the hilltops, the company did acknowledge the second move in a blog post about the spot bitcoin private trust for institutional clients.
“Bitcoin is the oldest, largest, and most liquid cryptoasset, and is currently the primary subject of interest from our clients within the cryptoasset space,” the blog states. “Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets.”
Justin d’Anethan, Institutional Sales Director at digital asset trader Amber Group, told Asian tech website Forkast in an Aug. 12 interview that BlackRock’s new fund will push other large institutions to offer similar products for fear they may become obsolete.
“It’s showing you a trend,” d’Anethan said. “In the coming future … you will see other fund providers or large asset managers offering investment instruments or vehicles to their different investors.”
Coinbase took the lead in announcing on Aug. 4 it was selected by BlackRock to provide institutional clients of Aladdin, BlackRock’s end-to-end investment management platform, with direct access to crypto, starting with bitcoin, through connectivity with Coinbase Prime.
“Coinbase Prime will provide crypto trading, custody, prime brokerage, and reporting capabilities to Aladdin’s Institutional client base who are also clients of Coinbase,” said the blog post by Brett Tejpaul, Head of Coinbase Institutional and Greg Tusar, Vice President, Institutional Product.
Built for institutions, Coinbase Prime integrates advanced agency trading, custody, prime financing, staking, and staking infrastructure, data, and reporting that supports the entire transaction lifecycle. Coinbase’s clients include hedge funds, asset allocators, financial institutions, corporate treasuries and other institutions.
“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets,” said Joseph Chalom, Global Head of Strategic Ecosystem Partnerships at BlackRock. “This connectivity with Aladdin will allow clients to manage their bitcoin exposures directly in their existing portfolio management and trading workflows for a whole portfolio view of risk across asset classes.”
The blog concluded by saying BlackRock and Coinbase will continue to progress the platform integration and will roll out functionality in phases to interested clients.
Scaramucci chimes in
The news caught the attention of founder and managing partner of Skybridge Capital Anthony Scaramucci, who told CNBC recently that “two major things have happened on the institutional side” that will likely generate demand for bitcoin. He cited Fidelity allowing bitcoin in 401ks as the first, and BlackRock’s partnership with Coinbase and its establishment of the Bitcoin fund as the second.
In the CNBC interview, Scaramucci said those last two developments are signs that Fink is acknowledging the rise in institutional demand for digital assets. “Otherwise he wouldn’t be setting up those products, and he wouldn’t be teaming up with Coinbase,” Scaramucci said.
He added that these developments are adding to a resurgence of investor interest in the cryptocurrency market, and will contribute to a “demand shock” for bitcoin that will send its price soaring—even predicting it could reach $300,000 per coin within the next six years.
The price of Bitcoin is down roughly 50% year to date at $23,878 as of mid-day Aug. 16, trading at about two-thirds lower than its high of nearly $69,000 last November.
SEE ALSO:
• SkyBridge’s Anthony Scaramucci: ‘Bitcoin is a Retirement Asset’
• Fidelity’s ‘Bitcoin-in-401ks’ Plan Moving Forward Despite Questions from Senators
• ‘Crypto Winter’ Tests 401k Plan Participants’ Faith
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.