BlackRock Doubles Down on Blockchain
BlackRock Doubles Down on Blockchain
“We are hearing from clients around the world about the need for crypto…the rally today is about a flight to quality. Whether that is treasuries, gold, or crypto. I believe crypto will play that type of role as a flight to quality.”
-Larry Fink, CEO and Founder of BlackRock
Blockchain technology promises to not only digitalize transactions and commerce but also to redefine global financial services. The horizon looks promising with the potential to tokenize currencies, commodities, and other assets. But it’s not only venture capitalists and technologists who are working toward this vision, but also the world’s leading financial institutions who believe we find ourselves at the precipice of a transformative era in financial products.
Today we are writing to highlight how for the second time this summer Larry Fink – the CEO and founder of the world’s largest asset manager – has publicly endorsed blockchain technology. All despite the negative media attention caused by the FTX circus and the trial of its disgraced founder.
Despite recent market oscillations causing some skepticism in the US about the speed and true potential of blockchain's integration, our conviction in our investment philosophy remains unwavering:
“The digital transformation of monies, commodities, and assets is inevitable. A complete overhaul of the global financial infrastructure is necessary to realize digital commerce.”
It's pivotal to see past the transient challenges and center our attention on enduring trends and the avenues for value creation they promise. Any seasoned investor will affirm that foresight into emerging and powerful trends is the golden ticket to exceptional returns. And currently, the trajectory is unmistakable. Global financial leaders are increasingly embracing the future we've foreseen and articulated for the past ten years.
None more so than BlackRock and its esteemed founder Larry Fink. Below we recap the notable recent events demonstrating the institution’s embrace of the technology.
Recapping BlackRock’s Blockchain Embrace
BlackRock Files for Spot Bitcoin ETF: First in June, Blackrock filed for a spot Bitcoin exchange traded fund (ETF) within its iShares platform.
A First for BlackRock: Until this event, BlackRock had never filed for a blockchain-related ETF.
Larry Fink's Previous Stance: The CEO of BlackRock, Larry Fink, one of Wall Street's most influential figures, had previously labeled Bitcoin as an "index of money laundering."
SEC's Track Record: By that time, the Securities and Exchange Commission (SEC) had not granted approval to the numerous ETF applications it had received for a spot Bitcoin product.
BlackRock's ETF Success Rate: The asset management giant boasts a commendable track record with ETFs, having secured approval for 575 ETFs with only 1 rejection.
Larry Fink's Changed Outlook: After the ETF filing, Fink made a television appearance, highlighting his robust support for blockchain technology. He heralded it as the forthcoming colossal advancement in financial technology – a sentiment we've echoed for over a decade.
This chain of events underscores the evolving sentiments and the increasing institutional acceptance of blockchain technology and cryptocurrencies. For a full recap and analysis please see Letter from London Vol 2, No. 6.
BlackRock Doubles Down
Our attention was again recently captivated by a series of events that unfolded over the last week. The sequence began with a tweet suggesting that the SEC had given the green light to BlackRock's ETF. In an almost instantaneous reaction, Bitcoin's price surged by 7%. However, within the span of an hour, this claim was debunked, causing the Bitcoin price to retreat.
While the aforementioned might seem rather mundane, what caught our eye was Larry Fink's subsequent move. Seizing the moment, Fink made yet another television appearance to champion the virtues of blockchain and cryptocurrencies. He specifically remarked:
“It’s an example of pent of interest in crypto. We are hearing from clients around the world about the need for crypto…the rally today is about a flight to quality. Whether that is treasuries, gold, or crypto. I believe crypto will play that type of role as a flight to quality.”
His comments echo what we’re seeing and hearing in the market. The world’s largest financial actors and players all understand that the next wave of innovation is occurring.
Moreover, it’s clear that Larry Fink fully expects approval of his Bitcoin ETF. He has now publicly backed the asset class twice in a single summer.
But what else has changed since Larry Fink’s first comments in June? What’s different this time?
Well, in the interim, we've observed two other financial juggernauts publicly embrace blockchain technology as financial innovation.
The Rise of Institutional Adoption
In August, PayPal broke new ground by announcing an unprecedented blockchain project: the debut of its U.S. dollar-backed stablecoin. This marked PayPal as the first major U.S. financial institution to embark on such a journey. The launch of PayPal USD (PYUSD), crafted in partnership with Paxos Trust Company, signifies a transformative chapter in financial transactions, introducing a cutting-edge payment method for its users. Our team at Blockchain Coinvestors had foreseen such strides, especially given our stance on stablecoins being among the most impactful applications of blockchain technology. While PayPal has been a pioneer in financial innovation for years, we predict other industry leaders will soon roll out their own stablecoins soon.
Then in September, Visa unveiled its blockchain strategy, incorporating the Solana blockchain to facilitate settlement with merchants. This capability enables near-instantaneous settlements for Visa across a spectrum of global currencies. What stands out is a well-established payment giant like Visa leveraging blockchain technology to streamline its operations and reduce costs. This move not only accelerates settlement times but also decreases Visa's dependence on traditional banks and their corresponding fees.
The View from London: Skating to Where the Puck is Heading
As early-stage investors, we identify and invest ahead of powerful trends. The importance of foresight and proactive action rather than just reacting to the present situation cannot be overlooked.
Current events can sometimes overshadow underlying movements. The media spotlight is predominantly on FTX and the ongoing trial of its beleaguered founder, Sam Bankman-Fried. However, beneath this clamor, discerning observers will identify a consistent trajectory: the world's premier financial institutions are progressively embracing blockchain technology as the forthcoming frontier in financial innovation. Just this summer, BlackRock, PayPal, and Visa have all independently launched major initiatives embracing blockchain technology.
All signs point to widespread institutional adoption. We believe the window for investing ahead of this powerful trend is quickly closing. As venture investors, we must strategically position our resources to ride this impending wave, maximizing our potential for exceptional returns.
It's with this vision that we unveiled our newest Fund of Funds, designed to capture diversified, early-stage access to the blockchain asset class. The consistent public endorsements from industry stalwarts like Larry Fink only cement our belief: now is the moment for decisive action.
Thank you for reading.
Mitch Mechigian
Partner, London
ABOUT BLOCKCHAIN COINVESTORS
Blockchain Coinvestors is the best way to invest in blockchain businesses. Our vision is that digital monies, commodities, and assets are inevitable and all of the world’s financial infrastructure must be upgraded. Our mission is to provide broad coverage of early stage blockchain investments and access to emerging blockchain unicorns. Blockchain Coinvestors’ investment strategies are now in their 10th year and are backed by 400+ investors globally. To date we have invested in 40+ pure play blockchain venture capital funds in the Americas, Asia, and Europe and in a combined portfolio of 750+ blockchain companies and projects including 75+ blockchain unicorns. Blockchain Coinvestors’ first fund of funds ranks in the top decile amongst all funds in its category on both Pitchbook and Preqin. Headquartered in San Francisco with a presence in London, New York, Grand Cayman, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle.
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