$10,000,000,000,000 Asset Manager Hails Potential of Bitcoin and Crypto Amid US Banking Crisis

The CEO of the world’s largest asset manager, BlackRock, says that Bitcoin and crypto-assets have the potential to increase 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 emerging industry and offer investors a way to invest in the space.

“For the asset management industry, we believe that the operational potential of some of the underlying technologies in the digital asset space could have exciting applications. In particular, the tokenization of asset classes offers the opportunity to drive efficiency in capital markets, shorten value chains, and improve cost and access for investors.”

Fink says the US now lags significantly behind much of the world in terms of financial innovation.

“In many emerging markets – such as India, Brazil and parts of Africa – we are witnessing dramatic advances in digital payments, reducing costs and promoting financial inclusion. In contrast, many developed markets, including the United States, are lagging behind in innovation, which makes the cost of payments much higher.”

BlackRock partnered with Coinbase last year to offer Bitcoin to institutional investors, a move Fink says is likely just the beginning.

“At BlackRock, we continue to explore the digital asset ecosystem, particularly areas most relevant to our clients, such as permissioned blockchains and the tokenization of stocks and bonds. While the industry is maturing, there are clearly elevated risks and the 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 as we do across our business.”

Fink also addresses the ongoing banking crisis that began in the United States and has now spread abroad.

He questions whether financial dominoes will begin to fall as regulators step in to prop up the system.

“This past week we saw the biggest 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 is too early to know how extensive the damage is. The regulatory reaction has so far been swift, and decisive actions have helped to avert the risk of infection. But the markets are still on edge. Will asset-liability mismatches be the second domino to fall? Previous austerity cycles have often led to spectacular economic conflagrations—whether it was the savings and loan crisis that unfolded throughout the eighties and early nineties or the bankruptcy of Orange County, California, in 1994…

As banks become potentially more constrained in their lending, or as their customers wake up to these asset-liability mismatches, I expect they are likely to turn in greater numbers to the capital markets for funding. And I imagine many corporate treasurers today are thinking about having their bank deposits swept every night to reduce even their overnight counterparty risk.”

You can check out the full letter to investors here.

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Featured image: Shutterstock/Larich