Inside BlackRock’s Road to Embracing Crypto, According to Former Employees

• A defining theme for BlackRock in 2022 has been the public push for digital assets.
• Major crypto partnerships followed customer interest and internal influence from enthusiastic employees.
• Insider surveyed BlackRock’s development around digital assets, according to people in the know.

When Larry Fink talks, Wall Street listens. In the fall of 2017, the BlackRock CEO said that bitcoin “just shows you how much demand there is for money laundering in the world.”

“That’s all it is,” Fink said with a laugh during a discussion at an Institute for International Finance meeting, comparing the cryptocurrency to an index of illegal activity.

Fink was hardly alone in his criticism at the time. Crypto was “a scam,” said JPMorgan CEO Jamie Dimon, and “rat poison,” according to Warren Buffett.

However, at the bottom of the chain of command at BlackRock, the crypto market found a devoted following. A group of employees at the firm organized themselves and began holding a forum to discuss crypto, five people familiar with the group told Insider.

The effort was “a very grassroots thing,” one of the people said. The staff invited crypto heavyweights including Gavin Wood, co-founder of ethereum, and Erik Voorhees, founder of token service ShapeShift, to discuss the industry.

“It was like a bunch of people’s hobbies and we turned it into an educational group,” said one employee who attended these meetings about the effort to organize internal dialogues around crypto. “We tried to get everybody smart about it.”

Top management met interest from some rank-and-file employees with varying degrees of support, saying they tended to see crypto as a low priority at the time. Management regularly engaged with a working group on blockchain technology and in 2018 began making a concerted effort to study digital assets.

But not everyone felt that BlackRock took the space seriously.

“I left the firm because of the opposition to crypto products,” said a former junior employee who worked at Aladdin, the firm’s huge technology business and left in 2021. “I was told that ‘our customers don’t care about crypto and we have no interest in do it. We have more important things to do’.”

Cross-divisional employees like Aladdin researched and managed the space. As bitcoin’s price surged in late 2017 and token sales known as initial coin offerings proliferated, employees packed conference rooms at BlackRock’s San Francisco offices each month to watch speakers at the crypto-asset forum. Eager, usually younger, employees huddled together to hear industry experts talk about crypto and blockchain. One person who attended the meetings said there was a sense of “absolute mania” in the air.

The tide began to turn. The firm eventually hired staff dedicated to digital assets — and some crypto-curious clients began asking what BlackRock could do for them.

Fink toned down his public comments about the industry. The $8 trillion asset manager launched an exchange-traded fund that holds companies involved in blockchain and crypto, and the firm invested in stablecoin issuer Circle this spring. The firm’s Aladdin business announced a major partnership with Coinbase this summer. A week later, BlackRock said it would begin offering spot bitcoin exposure to US institutional clients through a private trust.

This year is shaping up to be the biggest yet for the asset manager’s crypto initiatives. Insider spoke to eight former and current employees to get the most complete picture yet of BlackRock’s development around digital assets.

Like other traditional financial firms that have lost employees to digital asset firms, dozens of people have left BlackRock for crypto companies such as Coinbase, Circle, New York Digital Investment Group and Galaxy Digital in recent years. Other firms have also trotted cautiously into forming crypto strategies. Regulators are still ironing out rules, and the asset’s wild price swings mean severe boom-and-bust cycles. After all, crypto’s market cap has fallen 66% since its record high last year, according to crypto data provider Messari.

But decision-making at BlackRock – a massive money manager, a major fintech provider and a consultant to governments and central banks – and the messages it sends to the industry carry particular weight. Just as investors pay close attention to the firm’s calls for stock market direction, leadership in sustainable investing and influential voices on other companies’ policies, they are watching to see how the firm plays in the crypto market.

A junior employee touched on BlackRock’s crypto efforts

The Blockchain Working Group and the Informal Crypto Assets Forum will end up being key footnotes in the firm’s history. BlackRock’s foray into crypto began with a memo nearly seven years ago from Mary-Catherine Lader, who was a new hire at the time.

In 2015, Lader had worked at the company for a full two weeks as vice president when she heard Fink’s skepticism about blockchain technology in a town hall. After the meeting, she sent an email to the head of her group detailing how BlackRock could be missing out on a huge opportunity if it ignored crypto entirely.

The memo, which Bloomberg reported this summer, caught the attention of senior management, including Rob Goldstein, the company’s CEO. In an initiative sparked by the memo, Lader soon became head of the firm’s blockchain working group, and the company saw her as a champion of crypto efforts internally.

A cross-team group of employees came together and researched crypto for months, talking to industry experts such as Joseph Lubin, one of the founders of ethereum. They explored potential investments, ways to use blockchains and partnerships in the space.

In 2016, this blockchain working group presented findings to executives, who largely put their ideas on the back burner. The view from management was that it was too early, former employees said. There was not enough infrastructure or regulatory clarity in crypto to start doing business with large clients.

A head of digital assets, Robert Mitchnick, joined in 2018 as the first full-time employee focused on the space at BlackRock. He reported to Lader until late 2019, when Lader went to work on Aladdin’s sustainability tools.

In early 2020, Mitchnick and the digital assets team began reporting to Joseph Chalom, a longtime BlackRock executive who was then CEO of BlackRock Solutions, the unit of BlackRock that houses Aladdin.

Later that year and in early 2021, bitcoin’s price rose to record high levels. Asset management and Aladdin clients started asking BlackRock’s team about crypto exposure more often. The firm added bitcoin futures as an investment option in two of its funds in January 2021.

“Our clients are at different points in their digital asset journey, and that’s OK — whether it’s an asset management client or an Aladdin technology client,” Chalom, who is now BlackRock’s global head of strategic ecosystem partnerships, said in an interview. “But the transformation of the ecosystem continues to accelerate at a rapid pace.”

Customers’ changing appetites

Fink has recognized that customers’ interest in exposure to digital assets has grown significantly.

He said on a call to discuss earnings in April 2021 that crypto issues had not come up often in conversations with clients. Short-term crypto trading dynamics generally also did not fit with the firm’s approach as a long-term investor, Fink said.

At BlackRock’s annual shareholder meeting a month later, he said that crypto could play a role in long-term investing and that the firm continued to study it. “Every conversation I have on the street, in restaurants, with taxi drivers, they want to know about crypto,” Fink said. He reiterated that crypto did not come up in conversation with long-term investors.

A year later, in April 2022, Fink told analysts that the firm was increasingly seeing interest from clients and that the firm was studying digital assets and their ecosystems. The firm had just announced its investment in Circle.

“Even though it’s been a crypto winter, it’s still a trillion dollar market cap,” Chalom said. “We see the acceleration of these technologies both creating opportunities and efficiency.”

A BlackRock representative declined to specify how many employees are working on digital asset initiatives across teams. The firm continues to “seek new, talented, highly motivated individuals to add to our team of digital assets and capabilities,” the representative said.

BlackRock’s “optimists” and “realists”

Some employees who left between 2018 and 2022 told Insider that BlackRock’s partnerships and investments they announced this year surprised them.

A former Aladdin employee who left BlackRock in 2021 said they were surprised to see the partnership between Aladdin and Coinbase because “it was pretty much a 180” change from their experience with crypto at BlackRock.

“There are definitely quite a few who just left because of the opposition” to crypto initiatives, the person said. “It’s a mixture of frustration” and “it’s kind of ridiculous for us, as far as this reverse.”

Another former employee said they spent so much of their time learning about crypto out of their own curiosity, “that there was no way BlackRock was getting as much value out of me in the hours that they’re paying for me to be in their building.”

In some ways, BlackRock was early in starting a dialogue around crypto. The 2015 town hall took place just months after ethereum’s network went live and years before major blockchain ecosystems like Solana and Avalanche existed. Other firms began to toe into the space. In 2016, JPMorgan unveiled a blockchain platform called Quorum, which ethereum software company ConsenSys later acquired.

As the forum grew, factions emerged. There were the “optimists” or those who thought BlackRock would soon be able to launch a bitcoin ETF, and the “realists” or those who thought the structured product could take years, like a former employee who was active in the early crypto. -aktiva forum said so.

In the forum’s early days, participation in the group often depended on how well the crypto markets performed. When bitcoin was up, interest was high. A former employee who left for a blockchain startup said, “I’m not exaggerating when I say you could probably have mapped attendance by price and gotten a 70% correlation.”

Leaving BlackRock for crypto

Lader left BlackRock in June 2021 for Uniswap, the world’s largest decentralized exchange protocol, where she is now CEO. “It felt riskier to stay in a traditional institution than to jump into crypto full-time,” she told Bloomberg this summer.

She was seen as the most influential person at the firm when it came to crypto discussions, former employees told Insider. Earlier in her time at BlackRock, she was chief of staff for Goldstein. She was “very, very central” to the firm’s crypto efforts,” said one former employee. “She had access to the ears of the entire senior management team, effectively.”

But even as crypto enthusiasts found advocates internally, people left. There was a “line at BlackRock to do the fun work” of working on digital assets or blockchain research full-time, another former employee said.

It “looked impossible for BlackRock to do anything” significant in the space in the near term, the person said. “That’s why I think a lot of us left.”

BlackRock is now working on its partnerships with Coinbase and Circle and focusing on the four parts of its crypto strategy: stablecoins, tokenization, permissioned blockchains and cryptoassets.

BlackRock management highlights this effort. While acknowledging the “precipitous decline” in crypto assets, Fink said on an earnings conference call this summer that the firm was still seeing “more interest from institutional clients on how to efficiently access these assets.”