Bank on BLKC as financial companies embrace blockchain

Blockchain technology is often associated with the cryptocurrency universe, and while the latter is widely seen as the starting point for the former, blockchain is a fast-growing, rapidly evolving concept with applications across a variety of industries.

This expansive use case is relevant to investors considering blockchain stocks and exchange-traded funds such as Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC). BLKC tracks the Alerian Galaxy Global Blockchain Equity, Trusts and ETPs Index and is home to 55 holdings.

While some of the ETF’s components are direct bets on bitcoin prices and the broader crypto universe, the Invesco fund also offers significant exposure to blockchain expansion. Some analysts see the financial services industry as the most important territory for this expansion.

“Blockchain and digital assets opens the door to new markets, products and processes for institutional investors. They are used to address some key investment pain points, including the speed at which trades can reach finality, the transparency of trade records for price discovery, and the creation of liquidity for previously illiquid assets,” according to a recent Cowen report.

BLKC allocates more than 16% of its weight to the financial sector, and some of the ETF’s holdings from that group certainly fit the bill as “big banks.” That’s relevant because some of these firms are already embracing blockchain technology.

“Financial institutions very quickly realized that this was transformative technology. More than 40 of the world’s largest banks collaborated on the creation of the world’s first blockchain for financial services, R3 Corda. ING and Credit Suisse executed their first blockchain-based securities transactions more than five years ago, and in In 2020, JP Morgan executed its first intraday repo settlement on what has now matured into its Onyx Digital Assets platform, Cowen added.

JPMorgan Chase & Co. (NYSE:JPM) accounts for 1.48% of the BLKC list. There are other reasons why large banks and other financial services firms are considering blockchain technologies. These include increased efficiency, strengthening technology stacks and strengthening security – all of which can have a significant impact on bottom line growth.

“Regulation is also evolving to meet the needs of this brave new world. The early involvement of banks and financial services ensured that consumer safety was always going to influence the use of blockchain and digital assets. Regulators are beginning to make progress in applying existing consumer protection rules to businesses with digital assets. Strong anti-money laundering measures, including the recent crackdown on dark web exchanges, have reduced the opportunities for cybercriminals and fraudsters to hide from forensic investigators,” Cowen concluded.

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VettaFi LLC (“VettaFi”) is the index provider for BLKC, for which it receives an index license fee. However, BLKC is not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or responsibility in connection with the issuance, administration, marketing or trading of BLKC.

The opinions and forecasts expressed herein are solely those of Tom Lydon and may not materialize. Information on this website should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.