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 support the emerging industry and offer investors a way to invest in the space.
“For the asset management industry, we believe that the operational potential of some of the underlying technologies in the digital asset space can have exciting applications. In particular, the tokenization of asset classes offers the opportunity to create efficiency in capital markets, shorten value chains and improve costs and access for investors.”
Fink says the U.S. now lags significantly behind much of the world in financial innovation.
“In many emerging markets – such as India, Brazil and parts of Africa – we are witnessing dramatic advances in digital payments, bringing down costs and promoting financial inclusion. In contrast, many developed markets, including the US, 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 just the beginning.
“At BlackRock, we continue to explore the digital asset ecosystem, particularly areas most relevant to our clients, such as permissioned blockchains and the tokenization of stocks and bonds. As the industry matures, there are clearly heightened risks and a need for regulation on this market. BlackRock is committed to operational excellence, and we plan to apply the same standards and controls to digital assets as we do across our business.”
Fink also addresses the ongoing banking crisis that began in the United States and has now spread abroad.
He questions whether financial dominoes are starting to fall as regulators step in to prop up the system.
“This past week we saw 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 in the past week.
It is too early to know how widespread the damage is. The regulatory response has so far been swift, and decisive action has helped to avert the risk of contagion. But markets remain on edge. Will asset-liability mismatches be the second domino to fall? Previous austerity cycles have often led to spectacular financial conflagrations—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 become potentially more constrained in their lending, or as their customers wake up to these asset-liability mismatches, I expect they will likely turn to the capital markets for funding in greater numbers. And I imagine many corporate treasurers today are thinking about having their bank deposits swept every night to reduce even overnight counterparty risk.”
You can see the entire letter to investors here.
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Featured image: Shutterstock/Larich