- Clients will benefit from assistance in managing their Bitcoin exposure.
- An SEC investigation into Coinbase’s trading of digital tokens is ongoing.
The world’s largest asset manager, BlackRock Inc. is entering the cryptocurrency market, which has been battered by falling prices and government investigations, by partnering with Coinbase Global Inc. to make it simpler for institutional investors to manage and trade Bitcoin.
At 10:28 in the morning in New York, Coinbase surged 19 percent to $95.81. The biggest US cryptocurrency trading platform, whose shares have lost more than two-thirds of their value this year through Wednesday, is somewhat relieved by the partnership with BlackRock.
According to a statement released on Thursday, elite BlackRock clients will be able to use its Aladdin investment-management system to monitor their exposure to Bitcoin along with other portfolio assets like stocks and bonds, as well as to facilitate financing and trading on Coinbase’s exchange. The partnership with Coinbase, the largest US cryptocurrency trading platform, “will initially focus on Bitcoin,” according to BlackRock.
Even after such assets experienced a meltdown this year, BlackRock’s move increases the traditional Wall Street financial players’ involvement in cryptocurrencies and related technologies. About half of Bitcoin’s value was lost in 2022, and the failure of the Terra ecosystem and the hedge fund Three Arrows Capital has prompted increased regulatory scrutiny and questions about the market’s resilience.
The US Securities and Exchange Commission is looking into whether Coinbase allowed Americans to trade digital assets that ought to have been registered as securities. Because of Coinbase’s size in the market and its role as a provider of trading, custody services, prime brokerage, and reporting capabilities, BlackRock decided to work with it. Both companies’ customers will be able to access the services.
“Our institutional clients are increasingly interested in gaining exposure to digital-asset markets and are focused on how to efficiently manage the operational life cycle of these assets,” said Joseph Chalom, global head of strategic ecosystem partnerships at BlackRock.
According to the company, institutional investors accounted for roughly three-quarters of the $309 billion in trading volume on Coinbase in the first quarter. Hedge funds, corporate treasuries, and asset managers are among Coinbase’s clients.
“The Coinbase partnership between BlackRock and Aladdin is an exciting milestone for our firm,” said Brett Tejpaul, head of Coinbase Institutional, and Greg Tusar, vice president of institutional product, in a separate statement. “As institutional crypto adoption continues to accelerate, we are committed to pushing the industry forward and creating new access points.”
The collaboration is the next step in BlackRock’s larger strategy to expand into digital assets. In March, CEO Larry Fink stated that the firm was researching the growing importance of digital assets and stablecoins and how they can be used to assist clients. The following month, the company announced that it had joined a group of investors in Circle Internet Financial, the issuer of USD Coin and that it would seek to serve as the stablecoin’s primary manager of cash reserves.