Larry Fink Doubles Back on Bitcoin – POLITICO

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Five years after calling Bitcoin a “money laundering index,” BlackRock’s Larry Fink gets laser eyes.

BlackRock announced Thursday that it is launching an investment fund for qualified investors (read: wealthy, institutional) that will track the price of Bitcoin. It is the latest in a series of maneuvers that have put BlackRock, an $8.5 trillion investment firm that helped the Federal Reserve in successive financial system meltdowns, in a position to wield enormous influence in markets that its chief executive once derided as criminal.

In April, BlackRock entered into a strategic partnership with Circle to explore how its dollar-pegged stablecoin USDC – a key element of crypto’s market infrastructure – could be launched in the capital markets. The firm struck a separate partnership with Coinbase last week that connected BlackRock’s portfolio management system to the crypto exchange’s institutional investment platform.

Whatever concerns Fink expressed recently, BlackRock is taking action even as the SEC, CFTC, banking regulators and law enforcement clamp down on crypto businesses after a market collapse that wiped out roughly $2 trillion in value in a matter of months.

“Despite the sharp decline in the digital asset market, we continue to see significant interest from some institutional clients in how they can efficiently and cost-effectively access these assets using our technology and product capabilities,” BlackRock said in a statement announcing the investment fund.

To be clear, these investors are interested even though Washington has not come up with a unified set of rules for crypto marketplaces. Given BlackRock’s deep pockets and significant sway, it begs the question – what steps will it take to influence or shape conversations around crypto regulation or legislation?

It is difficult to answer. BlackRock did not respond to requests for comment.

Despite whatever access BlackRock’s name might give its crypto partners, the firm is unlikely to “get into the fray” when it comes to Washington policy battles over specific products like stablecoins or central bank digital currencies, said Dante Disparte, Circle’s chief strategy officer and head of global politics.

Still, some crypto-friendly investment managers say they hope the new mutual fund will bolster the industry in its battles with market regulators over digital asset mutual funds — including a Bitcoin ETF.

The SEC has repeatedly rejected proposals for Bitcoin exchange-traded funds from firms such as Grayscale Investments, Fidelity Investments and SkyBridge Capital on the grounds that the vehicles could not protect investors from fraud or manipulation. ETFs linked to Bitcoin futures contracts are approved.

“One of the largest, most established traditional financial players has made a major entry into the crypto space (and possibly the bitcoin ETF competition as well, as a trust can be converted into an ETF),” said SkyBridge founder and managing partner Anthony Scaramucci — who briefly served as former President Donald Trump’s communications director in 2017. “This is a positive development for the current regulatory environment.”

A Bitcoin ETF may be beside the point at this stage, said Steven McClurg, co-founder and CIO of digital asset fund manager Valkyrie Investments. (Like all other Bitcoin ETF applications, Valkyrie’s attempt to launch a Bitcoin ETF was blocked by the SEC.)

“As more institutional products enter the ecosystem, a Bitcoin ETF becomes less relevant,” McClurg said. “Most institutional investors do not use ETFs for market access.”

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University of Michigan consumer sentiment and inflation expectations survey data out at 10 a.m

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EBB INVESTMENT, RETURN — Reuters Patturaja Murugaboopathy: “U.S. high-yield bond funds are attracting heavy investment, a turnaround from the selloff of the first half of this year, as investors bet the Federal Reserve will limit future rate hikes to try to stave off an economic slowdown. “

OH, MELVIN — From the WSJ’s By Juliet Chung, Susan Pulliam and Dave Michaels: “The U.S. Securities and Exchange Commission is taking a closer look at risk controls at Melvin Capital Management and investor disclosure after the hedge fund was devastated by the meme stock rally last year, people familiar with the matter said .”

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STABLE(?)COINS — Yale School of Management’s program on financial stability Steven Kelly for the FT: “The three biggest stablecoins – Tether’s tether, Circle’s USDC and Paxos and Binance’s BUSD – are currently in a security measurement competition… [The issuers’ disclosures highlight] the problem underlying the stablecoin story. They can only import stability, not produce it, making them a net drain of stability from the financial system.”

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