The world's largest asset manager wants to make cryptocurrencies more accessible to its institutional clients. A welcome step for partner Coinbase, which is facing regulatory problems.
You could hardly find two more divergent viewpoints on cryptocurrencies. Tee Fong Seng, head of private banking at Geneva-based bank Pictet in Asia, caused a stir at the Wealth Management Summit in Singapore with his statement «Crypto will be an asset class that we cannot ignore but today, I don’t think there is a place for private bankers and private bank portfolios». Contrast that with the world's largest asset manager, Blackrock, partnering with the US crypto exchange Coinbase.
Huge Vote of Confidence
Through this cooperation, Blackrock CEO Larry Fink aims to make cryptocurrencies directly accessible to institutional investors, starting with Bitcoin. Under the agreement, users of Blackrock's Aladdin institutional investment platform can sign up for Coinbase Prime to access crypto trading, custody, prime brokerage, and reporting. To participate in crypto trading, institutions must be clients of both Blackrock and Coinbase.
The integration comes about four months after Fink's announcement that Blackrock would explore ways to offer digital assets to its clients.
Coinbase Prime institutional trading solution boasts around 13,000 institutional clients and is specifically tailored towards institutions such as hedge funds, financial institutions, asset- and financial managers. For Coinbase's crypto ecosystem, the collaboration with Blackrock represents a huge vote of confidence given Blackrock's $8.5 trillion in assets under management at the end of the second quarter.
Jumping on the Bandwagon
The partnership shows that institutional investors are becoming increasingly confident in the crypto market. This year, several major financial players either have entered the market or expanded their existing initiatives and offerings in digital assets. Blackrock, JP Morgan, Goldman Sachs, Deutsche Bank and Morgan Stanley are but a fraction of a growing list of traditional financial institutions using digital assets.
This year's crash in cryptocurrencies seems to be helping institutional adoption, with investors who felt they missed the boat now seeing current prices as a good entry point. Joseph Chalom, Blackrock's Global Head of Strategic Ecosystem Partnerships, said the firm's institutional clients «are increasingly interested in engaging in the digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets.»
Timing is Everything
For Coinbase, this partnership couldn't have come at a better time. Its US-listed shares, considered an indicator of overall crypto market sentiment, currently trading about 65 percent lower than at the end of last year, 2021 closed about 10 percent higher on Thursday following the Blackrock announcement.
Coinbase, however, is facing regulatory issues. A former Coinbase product manager and two alleged accomplices are currently facing charges in a US federal court in Manhattan. Ishan Wahi is accused by U.S. law enforcement and the Securities and Exchange Commission (SEC) of insider trading while working at Coinbase.
SEC Target
According to media reports, the SEC is investigating the company for selling digital assets that should have been registered as securities, prompting long-time Coinbase supporter and investor Cathie Wood to unload Coinbase shares in a big way.
