The CEO of the world’s largest asset manager, BlackRock, says Bitcoin and crypto assets have the potential to boost financial inclusion and make it easier for investors to get ahead.
In a new letter to investors, Larry Fink says BlackRock will continue to back the emerging industry and offer investors a way to invest in the space.
“For the asset management industry, we believe the operational potential of some of the underlying technologies in the digital assets space could have exciting applications. In particular, the tokenization of asset classes offers the prospect of driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors.”
Fink says the US is now significantly lagging behind much of the world in financial innovation.
“In many emerging markets – like India, Brazil and parts of Africa – we are witnessing dramatic advances in digital payments, bringing down costs and advancing financial inclusion. By contrast, many developed markets, including the U.S., are lagging behind in innovation, leaving the cost of payments much higher.”
BlackRock partnered with Coinbase last year to offer Bitcoin to institutional investors, a move that Fink says is likely only the the beginning.
“At BlackRock we continue to explore the digital assets ecosystem, especially areas most relevant to our clients such as permissioned blockchains and tokenization of stocks and bonds. While the industry is maturing, there are clearly elevated risks and a 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 that we do across our business.”
Fink also addresses the ongoing banking crisis that began in the US and has now spread overseas.
He questions whether financial dominos are beginning to fall as regulators jump in to prop up the system.
“This past week we saw the biggest bank failure in more than 15 years as federal regulators seized Silicon Valley Bank. This is a classic asset-liability mismatch. Two smaller banks failed in the past week as well.
It’s too early to know how widespread the damage is. The regulatory response has so far been swift, and decisive actions have helped stave off contagion risks. But markets remain on edge. Will asset-liability mismatches be the second domino to fall? Prior tightening cycles have often led to spectacular financial flameouts – 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 potentially become more constrained in their lending, or as their clients awaken to these asset-liability mismatches, I anticipate they will likely turn in greater numbers to the capital markets for financing. And I imagine many corporate treasurers are thinking today about having their bank deposits swept nightly to reduce even overnight counterparty risk.”
You can check out the full letter to investors here.