Industry watchers, directors weigh the importance of the BlackRock-Coinbase Agreement

  • A Wall Street veteran identifies JPMorgan as a candidate for crypto capacity building
  • Fidelity spokesman says BlackRock deal “brings added legitimacy and credibility to this expanding space.”

BlackRock’s leap deeper into cryptocurrencies is a sign that institutions are moving beyond universal volatility, industry participants say – increasing the perspective of traditional financial competitors following in their footsteps.

The world’s largest asset manager said Thursday it is working with Coinbase to offer cryptocurrency access to its institutional clients. By combining the BlackRock, Aladdin and Coinbase Prime investment platform, companies provide clients with the ability to trade cryptocurrencies, trust, brokerage, and report.

The move is in the aftermath of TradFi’s other significant crypto efforts this year, which have made headlines as potential catalysts for industry growth. Goldman Sachs performed its first cash-settled cryptocurrency options trade with Galaxy Digital in March, and Fidelity said the following month that it would allow people to spend some of their retirement savings on bitcoin through the company’s 401 (k) investment plan.

Fidelity launched Fidelity Digital Assets – a platform that offers cryptocurrency storage and execution to institutional investors – in 2018.

“We believe this news adds legitimacy and credibility to this expanding space that will benefit our industry and customers,” said a Fidelity spokesman about BlackRock’s partnership with Coinbase.

Could others follow BlackRock?

While Fidelity built its digital asset division on its own, BlackRock apparently wanted to accelerate its cryptocurrency reach through its Coinbase partnership, said CK Zheng, co-founder and investment director of ZX Squared Capital.

Zheng, who spent most of his career at Bank of America, Morgan Stanley and Credit Suisse before starting a cryptocurrency hedge fund, previously told Blockworks that Wall Street firms would engage in profitable segments such as cryptocurrencies. derivatives.

“I think strong demand from institutional investors will be one of the major upside drivers in the next crypto cycle,” Zheng said after the deal with BlackRock. “Other financial institutions such as JPMorgan, which initiated the JPM digital coin, may wish to further build their crypto capabilities to meet the demand of their institutional clients, especially when the regulatory framework is further established.”

First disclosed in 2019, JPM Coin is a licensed payment queue and escrow account ledger that allows some JPMorgan customers to send US dollars through the system.

A JPMorgan spokesman did not request a comment.

Martin Bednall, former BlackRock managing director who recently became CEO of Jacobi Asset Management, called BlackRock a big step forward for an industry that gives institutional investors confidence to add digital assets to their investment world.

“Hopefully this news will be another catalyst for other big asset managers to initiate or accelerate their crypto plans,” he added.

Goliath’s asset management spokesmen Vanguard and State Street Global Advisors declined to comment on future cryptocurrency plans.

But Morningstar Equity analyst Michael Miller said he did not expect the deal to radically increase the speed with which asset managers were entering the segment, citing regulatory concerns and volatility as ongoing obstacles to institutional cryptocurrency involvement.

“The partnership between BlackRock Aladdin and Coinbase makes it easier for institutional investors from a functional point of view to engage and manage their cryptocurrency assets along with traditional investments, but I would be surprised if this opened the door to acceptability, given that it is not directly addressing the issues about which I mentioned, ”said Miller.

Kristin Smith, executive director of the Blockchain Association, said the BlackRock-Coinbase link is further evidence of the institutional adoption of cryptocurrencies.

“Larger adoption requires a regulatory framework for cryptocurrencies and I am optimistic that we will finally see much-needed legislation in 2023,” said Smith.

Jagdeep Sidhu, president of Syscoin, said in an email that the move could put pressure on lawmakers to push for innovation regulation given the influence of BlackRock.

“We are far from bull territory, but these kinds of changes create a strong foundation for future, sustainable growth for the digital space,” said Sidhu.

Coinbase to get a top-up?

While BlackRock’s decision to partner with Coinbase could be seen as positive support for the cryptocurrency exchange by a major investment firm, Miller said, he added that he did not expect it to be a major driver for Coinbase’s results anytime soon.

While the transaction improves the investment process for clients using Aladdin and the stock exchange, added a Morningstar analyst, he does not think it will significantly alter the investment decision account for institutional investors.

“There will be long-term benefits to both Coinbase and the crypto industry, but it will likely take time,” said Miller. “It’s also worth noting that for now, the trading link between the two is limited to buying bitcoin.”

Coinbase shares rose 4.6% during the day, starting Friday at 3:30 PM EST. In the last five days, it has increased by about 53%, but since the beginning of the year it has fallen by more than 60%.

The cryptocurrency exchange will conduct a Q&A session to discuss second-quarter financial results at 5:30 PM EST on August 9.

BlackRock shares fell 0.25% on Friday 3:30 PM EST. It increased by 5% compared to five days ago, but has so far decreased by around 24% in 2022.

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  • Ben Strack

    Ben Strack is a Denver-based reporter covering macro and crypto-native funds, financial advisers, structured products, and the integration of digital assets and decentralized finance (DeFi) with traditional finance. Prior to joining Blockworks, he worked in the asset management industry for Fund Intelligence and was a reporter and editor for various local Long Island newspapers. He graduated in journalism from the University of Maryland. Contact Ben by email at [email protected]

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