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BlackRock CEO Larry Fink: Beyond Bitcoin, The Rise Of Tokenization In Crypto

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The CEO of BlackRock, Larry Fink, has proposed in his yearly letter to investors that tokenization has the potential to be the next big trend in the realm of crypto after Bitcoin. 

While Bitcoin has dominated headlines, Fink believes that the media’s “obsession” has obscured other interesting developments happening in the digital asset space.

Fink notes that in emerging markets such as India, Brazil, and parts of Africa, dramatic advances in digital payments have brought down costs and advanced financial inclusion. 

In contrast, many developed markets, including the US, are lagging behind in innovation, leaving the cost of payments much higher, according to the letter.

Fink sees significant potential in the operational applications of digital assets technology for the asset management industry. Tokenization of asset classes, in particular, has the potential to enhance efficiency in capital markets, shorten value chains, and increase cost-effectiveness and accessibility for investors.

BlackRock is actively exploring the digital assets ecosystem, focusing on areas that are most relevant to their clients, including permissioned blockchains and tokenization of stocks and bonds.

While the digital asset industry continues to evolve, Fink acknowledges that there are heightened risks and a need for regulation in this market.

However, Fink’s annual letter to investors suggests that the cryptocurrency space is more than just Bitcoin, with tokenization offering exciting potential for driving efficiencies in capital markets.

Bitcoin Funds Decline Amid US Bank Failures

Bitcoin funds have seen a decline in the number of coins held as US bank failures fuel expectations of a Federal Reserve pivot towards liquidity easing. 

Data from ByteTree Asset Management shows that close-ended funds, spot and futures-focused exchange-traded funds in Europe, the US, and Canada have seen a decline of 16,560 BTC ($409 million) this month, reaching a 17-month low of 826,113 BTC. 

This suggests a lack of institutional participation in bitcoin’s recent rally, which has been attributed to safe-haven demand and hopes for Fed rate cuts later in the year. 

Despite this, the decline in fund balance does not necessarily mean the price rally is unsustainable, as other sources of demand are driving prices higher.

Related Reading | Bitcoin’s Active Addresses Gather Steam; 1.7M In 8 Weeks

BlackRock Chief Exec Says Despite FTX’s Fall, Crypto Still Stays Relevant

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BlackRock Chief Executive Larry Fink stated on Wednesday that the now-bankrupt FTX crypto exchange appears to have engaged in “misbehavior,” but that the technology behind crypto is relevant for the future.

“We’re going to have to wait to see how this all plays out (with FTX).” “I mean, right now we can make all the judgment calls and it looks like there were misbehaviors of major consequences,” Fink said.

BlackRock’s Fink stated that most crypto firms are not going to be around

At an event sponsored by the New York Times DealBook, he said the majority of crypto companies “are not going to be around” in the future.

Following its abrupt collapse, FTX filed for Chapter 11 bankruptcy protection in the US on November 11. It claimed it may owe money to more than 1 million creditors.

Through a billionaire fund it administers, BlackRock reportedly invested $24 million in FTX. In Sam Bankman-FTX, Fried’s other international asset managers including Temasek Holdings, the venture capital firm Tiger Global, and Sequoia Capital have also made investments.

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BlackRock Chief Exec Says Despite FTX’s Fall, Crypto Still Stays Relevant 2

Fink stated that he believes the technology behind crypto “will be very important” despite all of the issues surrounding FTX. “I think the tokenization of securities will be the next generation for markets and for securities,” he continued.

Treasury Secretary for the United States Janet Yellen called for regulation earlier on Wednesday and expressed her continued skepticism about cryptocurrencies. Fink painted a bleak picture of the economy, pointing to unusually high inflation, high-interest rates, slower growth, and a lack of room for fiscal stimulus.

It has also begun to evaluate how the infrastructure supporting the cryptocurrency market can be applied to its traditional money management business, which is the most recent indication that well-known fund groups are seriously considering digital assets.

BlackRock started providing cryptocurrency services in February. The New York-based company, which oversees over $10 trillion in assets for institutions, plans to enter the cryptocurrency market with “client assistance trading and then with their own credit facility,” according to one of the people. BlackRock would allow customers to borrow money by accepting crypto assets as security.

$10 trillion investment management company Blackrock to provide bitcoin trading services

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The world’s largest asset management company, BlackRock, plans to provide cryptocurrency trading to its investors.

According to one of the people, the New York-based firm, which manages over $10 trillion in assets for institutions, aims to join the cryptocurrency market with “client assistance trading and subsequently with their own credit facility.” Clients would be able to borrow money from BlackRock by offering crypto assets as security.

The information comes from three persons who are familiar with the plans. Clients, including some of the world’s most significant investment funds, will be able to trade cryptocurrencies using ALADIN, the company’s integrated investment management platform.

This isn’t the first time BlackRock has been linked to cryptocurrency-related schemes. Last year, Rick Rieder, BlackRock’s global fixed income chief investment officer, told CNBC that asset management had begun to get exposure to the Bitcoin area and had allocated funds to it. “I wouldn’t put a number on the percentage allocation one should have; it depends on what the rest of your portfolio looks like,” said BlackRock’s chief investment officer of global fixed income.

“Today the volatility of it is extraordinary, but listen, people are looking for storehouses of value.” “People are looking for places that could appreciate under the assumption that inflation moves higher and that debts are building, so we’ve started to dabble a bit into it.”

Rieder said on “Squawk Box

MicroStrategy’s CEO, Michael Saylor, routinely touts news about his firm’s bitcoin holdings, and BlackRock owns 16.3 percent of MicroStrategy.

Blackrock paves the way for more adoption

The cryptocurrency sector is seeing unprecedented widespread adoption. Many institutions that have previously ignored the market are now releasing crypto investing plans.

Countries with regulatory worries about the crypto business likewise attempt to become more welcoming to the asset class. Russia is an excellent example of this. Russia’s government has been split on its crypto stance for some time but has recently chosen to give regulatory clarity for the business rather than outright prohibit it.

Recently India released clarity on the budget speech regarding taxation on cryptocurrencies. Even though the country is charging a hefty tax amount of 30%, many believe it’s an initial step towards a much-awaited crypto mainstream adoption.

BlackRock Held 37 Bitcoin Futures Contracts From CME

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Following the crypto revolution in 2021, many prolific institutions have embraced Bitcoin. In the latest development, the investments giant and the world’s largest asset manager, BlackRock indicated that it could potentially include BTC futures in its funds in the coming days.

This was revealed in a regulatory filing with the United States Securities and Exchange Commission [SEC], as per which BlackRock held 37 futures contracts from the Chicago Mercantile Exchange [CME] that are worth approximately $360,458 earlier this year.

The latest figures regarding BlackRock’s holdings only represent a mere 0.0014% of the firm’s colossal Global Allocation Fund on reporting day of 31st of January. However, it is still not clear if the asset manager still holds any Bitcoin futures contracts. In addition, the original batch of futures contracts held by the company expired this 26th of March, as per the filing.

Dabbling in Bitcoin

This development comes almost two months after the multi-trillion-dollar asset manager had revealed that it has started to “dabble” in Bitcoin. While speaking about Bitcoin on CNBC, BlackRock’s chief investment officer of global fixed income, Rick Rieder had earlier stated that,

“I wouldn’t put a number on the percentage allocation one should have, depends on what the rest of your portfolio looks like. Today the volatility of it is extraordinary, but listen, people are looking for storehouses of value,” Rieder said on “Squawk Box.” “People are looking for places that could appreciate under the assumption that inflation moves higher and that debts are building”.

As mentioned above, BlackRock registers an astonishing $9 trillion in assets under management[ AUM], and happens to be the biggest investment management company in the world. Tailing behind it are other investment firms such as JPMorgan Chase, Fidelity, Vanguard, UBS, and BNY Mellon. Hence, the news is crucial for the cryptocurrency which has seen significant adoption this bull season.

In January this year, BlackRock had added Bitcoin futures as a potential investment for two of its funds. This was according to the company’s SEC filings. The two funds, in question, are BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund.