$10 billion wealth manager touts potential of bitcoin and crypto amid US banking crisis
The CEO of the world’s largest wealth manager BlackRock says Bitcoin and crypto assets have the potential to drive financial inclusion and make it easier for investors to get ahead.
In a new letter to investors, Larry Fink says BlackRock will continue to support the burgeoning industry and offer investors a way to invest in the space.
“For the wealth management industry, we believe the operational potential of some of the underlying technologies in the digital asset space could have exciting applications. In particular, tokenization of asset classes offers the prospect of increasing efficiency in capital markets, shortening value chains and improving costs and access for investors.”
According to Fink, the US is now lagging behind much of the world when it comes to financial innovation.
“In many emerging markets – like India, Brazil and parts of Africa – we are seeing dramatic advances in digital payments that are driving down costs and driving financial inclusion. In contrast, many developed markets, including the US, are lagging behind in innovation, making the cost of payments much higher.”
BlackRock partnered with Coinbase last year to offer Bitcoin to institutional investors, a move that Fink says is likely just the beginning.
“At BlackRock, we continue to explore the digital asset ecosystem, particularly areas that are most relevant to our clients such as permissioned blockchains and tokenization of stocks and bonds. As the industry matures, there are clearly increased risks and a need for regulation in this market. BlackRock is committed to operational excellence and we plan to apply the same standards and controls to digital assets that we apply across our business.”
Fink also addresses the ongoing banking crisis that began in the US and has now spread overseas.
He wonders if financial dominoes will start falling as regulators step in to prop up the system.
“Last week we witnessed the largest bank failure in more than 15 years when federal regulators seized Silicon Valley Bank. This is a classic asset-liability mismatch. Two smaller banks also failed in the past week.
It’s too early to know how widespread the damage is. The regulatory response has been swift so far, and decisive action has helped stave off risks of contagion. But the markets remain nervous. Will asset-liability mismatches be the second domino to fall? Previous tightening cycles have often resulted in spectacular financial flare-ups — be it the savings and credit crunch that swept through the 1980s and early 1990s or the bankruptcy of Orange County, California, in 1994…
As banks become potentially more constrained in their lending or their customers realize these asset-liability mismatches, I expect they will likely turn to the capital markets for funding in greater numbers. And I can imagine many corporate treasurers today thinking about having their bank deposits combed through every night to even reduce overnight counterparty risk.”
You can view the full letter to investors here.
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Featured image: Shutterstock/Larich