Larry Fink, the CEO of world's largest asset manager, BlackRock, is a late convert to bitcoin (BTC) but is now one of its most influential proselytizers. This year, BlackRock shocked the world by filing an application to launch an exchange-traded fund that holds bitcoin. It is not much of an exaggeration to say that BlackRock's unexpected filing reignited interest in a crypto trading vehicle that many assumed was a lost cause – even if its iShares Bitcoin Trust, if approved, would be just one of hundreds of ETFs it manages.
For years, the U.S. Securities and Exchange Commission has been hesitant to approve a spot bitcoin ETF, in part out of concerns about market maturity and manipulation. (There are ETFs in the U.S. that own bitcoin futures, but spot ETFs would give investors more direct exposure to bitcoin.) BlackRock, one of the leading firms on Wall Street, simply by showing interest, helped to legitimize the effort and shows there is likely demand for such a product. Several other traditional financial institutions including Fidelity, Franklin Templeton and VanEck, and a bevy of crypto-natives like Bitwise and Hashdex, followed suit in applying to list their own BTC ETFs.
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A bitcoin ETF is important because it would give a wider range of institutions the ability to gain exposure to BTC, by holding shares of BlackRock's iShares or WisdomTree's BTCW, for instance, rather than bitcoin directly. This means retail and institutional investors can invest in bitcoin via a 401(k) or index funds. Also, the structure of spot bitcoin ETFs, if there is consumer interest, could put increased buying pressure on BTC and potentially lead to higher prices.
Fink said in an October interview with Fox Business that BlackRock clients are showing heightened interest in crypto, and that BlackRock's offering would "democratize" access to the asset class. He has also discussed recent market momentum as a "flight to quality" among currencies, and said cryptos will "outshine" global currencies in the coming months.
Even more, Fink has said bitcoin, being an open, verifiable and stateless currency, could become an increasingly important financial instrument. This is notable in that Fink used to count himself in the "Jamie Dimon camp" – the JPMorgan CEO is a well-known crypto skeptic – and once said that the world didn't need "a new international currency." Some of his positions are consistent; Fink also said bitcoin could weaken the U.S. dollar's position as a reserve currency, but now sees value in that proposition.
Fink's conversion is notable in that it is happening at a time when many in legacy finance are taking another look at blockchain, particularly for "tokenizing" real-world assets like stocks and bonds. He is instead interested in cryptocurrencies themselves. In August 2022, BlackRock announced plans for crypto trading on its Aladdin investment platform. BlackRock has also filed to list an ETF for Ethereum's ether (ETH).
While BlackRock's motivations are understandable, not much is known about the internal mechanizations of why it would enter the market today. BlackRock's filing, which has tapped Coinbase as a third-party service provider, was notable in that it may have found an answer to the SEC's market surveillance requirements – which many other applicants have modeled. There is some speculation that Fink and SEC Chair Gary Gensler were in private communication about an ETF listing, and that Fink is acting on a reasonable expectation that an ETF may finally, and soon, be approved.
Whether BlackRock is first to market with its iShares bitcoin ETF, it's clear that Fink believes in the value of bitcoin.
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