BlackRock CEO Larry Fink Predicts a Promising Future for Crypto

In the early days of July, Nasdaq once again petitioned the U.S. Securities and Exchange Commission (SEC) to list a Bitcoin exchange-traded fund (ETF) by BlackRock. The amended document incorporates details designed to quell the regulator's concerns regarding the previous application, which the SEC described as imprecise and incomplete. In particular, it mentions that Coinbase Global Inc., a crypto exchange, will oversee market surveillance for the ETF. The document details the provision of Bitcoin price and liquidity data, along with efforts to deter fraud and market manipulation.

Speaking candidly, Larry Fink was not always a crypto-optimistic financier. In 2017, he characterized the crypto sector as an ‘index of money laundering’.

It wasn't until last year that Fink began to adopt a more bullish tone on crypto, experiencing a significant shift in sentiment. In April, he announced a strategic partnership with Circle, the issuer of USDC, with a goal to explore how this stablecoin could function in capital markets. Around the same time, Fink negotiated with Coinbase to offer institutional clients of Aladdin (BlackRock's investment management platform) access to crypto trading, staking, and other corporate platform options on Coinbase Prime. In August, BlackRock launched an investment fund for qualified investors that started tracking Bitcoin prices.

In December, while commenting on the FTX scandal, Larry Fink did not question the right of cryptocurrency to exist. The financial heavyweight merely pointed out that the primary mistake of the bankrupt exchange's management was the creation of their own token. Furthermore, during the discussions about FTX, the BlackRock CEO emphasized that the potential tokenization of financial markets was not a scam, but a new opportunity for instantaneous settlements and reduced commissions.

But Larry truly demonstrated his crypto enthusiasm in the summer of 2023. He confessed through a series of public declarations that he had initially been skeptical about cryptocurrencies. However, he now acknowledges their potential so much so that he has started comparing digital assets to gold. Traditional finance system is linked to specific currencies, while Bitcoin is a global medium of exchange and store of value. This makes digital gold a potential safeguard against inflation and currency devaluation.

Fink stressed BlackRock's commitment to working closely with regulators and its readiness to address any emerging issues. “We work really closely with our regulators, and ask ...what are their issues and we fix those issues around that,” he clarified.

Fink highlighted a major issue with cryptocurrencies – the substantial spread between demand and supply, which heightens their volatility and reduces their yield. He expressed optimism that the SEC would interpret BlackRock's application for a Bitcoin ETF as an opportunity to democratize cryptocurrency and reduce costs for investors.

There are strong indications that BlackRock's clients are profoundly interested in crypto assets.

Larry's public outreach campaign finally bore fruit. The SEC accepted Nasdaq's application for a spot Bitcoin exchange-traded fund (ETF) and announced its formal review. Moreover, on July 14th, the SEC revealed that it is examining similar applications from VanEck, Invesco Galaxy Bitcoin ETF, WisdomTree Bitcoin Trust, and other major players.

The SEC's readiness to even consider the notion of legalizing a Bitcoin ETF carries significant weight. It provides hope that the U.S. crypto industry may eventually operate with the regulator's approval. Crypto companies' precarious reliance on judicial rulings and case law may soon be a thing of the past. This signals a bullish trend for the entire crypto sector, a development that veteran institutional investor Larry Fink played a major part in.