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 progress.
In a new letter to investors, Larry Fink says BlackRock will continue to support 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 asset space could have exciting applications. In particular, the tokenization of asset classes offers the prospect of generating efficiencies in capital markets, shortening value chains, and improving costs and access for investors.
Fink says the United States now lags far behind much of the world when it comes to financial innovation.
“In many emerging markets – such as India, Brazil and parts of Africa – we are seeing dramatic advances in digital payments, reducing costs and advancing financial inclusion. In contrast, many developed markets, including the United States, lag 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 just the beginning.
“At BlackRock, we continue to explore the digital asset ecosystem, particularly the areas most relevant to our clients, such as permissioned blockchains and stock and bond tokenization. As the industry matures, there are clearly high 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 apply across our business.
Fink also addresses the ongoing banking crisis that began in the United States and has now spread overseas.
He wonders if the financial dominoes are starting to fall as regulators step in to prop up the system.
“Last week we witnessed the biggest bank failure in more than 15 years when federal regulators seized Silicon Valley Bank. This is a classic asset-liability mismatch. Two smaller banks also failed last week.
It is too early to know the extent of the damage. So far, the regulatory response has been swift and decisive action has averted the risks of contagion. But the markets remain on edge. Will active-passive asymmetries be the second domino to fall? Past tightening cycles often led to dramatic financial extinctions – whether it was the savings and loans crisis that unfolded throughout the 1980s and early 1990s or the bankruptcy of Orange County, California in 1994…
As banks potentially become more constrained in their lending, or as their customers become aware of these asset-liability mismatches, I predict that more of them are likely to turn to capital markets for funding. And I imagine many corporate treasurers today are considering having their bank deposits swept overnight to even reduce counterparty risk overnight.
You can read the full letter to investors here.
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Featured Image: Shutterstock/Larich