How Bitcoin Transformed BlackRock from "Skeptic" to "True Believer"

Source: The Wall Street Journal

Compiled by: Mary Liu, BitpushNews

As early as 2017, BlackRock CEO Larry Fink referred to Bitcoin as a "money laundering index," and he has repeatedly criticized cryptocurrencies, calling them "something that clients don't want to invest in."

Now, he says he is a staunch believer in Bitcoin. His company, BlackRock, manages the fastest-growing Bitcoin fund and has established partnerships with leading players in the digital asset industry.

Larry Fink's significant shift at BlackRock has legitimized Bitcoin and indicated that Wall Street is increasingly eager to tap into a market long considered the Wild West.

Through low-cost and popular spot ETFs, BlackRock has opened the door for mainstream investors to buy and sell Bitcoin as easily as stocks.

BlackRock's COO Rob Goldstein stated in an interview, "We believe that a core part of our mission is to provide choice and opportunity, which is an important topic for our clients."

The resilience of Bitcoin also played a role in this decision. The token has experienced significant ups and downs since its inception; however, after each crash, another boom cycle begins, attracting more investors.

Today, Bitcoin's price has returned to an all-time high, nearing $73,000, which seemed impossible 16 months ago when the cryptocurrency exchange FTX suddenly collapsed, and Bitcoin hovered around $16,000.

Industry critics express surprise at BlackRock's embrace of cryptocurrencies, as the company faces reputational risks when offering such volatile assets to clients.

John Reed Stark, former head of the SEC's Internet Enforcement Office, stated that companies like BlackRock are clearly attracted by the "fee game."

He said, "Ironically, it should be decentralized, but more decentralized than Wall Street giants is that it charges fees from every possible angle and peddles things that no one understands."

BlackRock currently charges an average fee of about 0.19% on its Bitcoin ETF assets. The fund has reached the fee waiver threshold, meaning investors pay a fee of 0.12% for the first $5 billion in assets or the first year of the fund's launch, after which the fee will rise to 0.25%.

BlackRock insists that it has conducted years of research on the crypto industry to formulate a digital asset strategy and provide clients with what they want.

According to insiders, the rebound of Bitcoin after the 2022 cryptocurrency crash solidified BlackRock's belief in sticking to this strategy.

BlackRock is one of the key drivers of the latest surge in Bitcoin. Among the nine spot Bitcoin ETFs launched in January, its iShares Bitcoin Trust leads in net inflows. In fact, this ETF is the fastest in history to absorb over $10 billion in assets.

Many mainstream investors began buying Bitcoin in June when BlackRock entered the race for spot Bitcoin ETFs, as the asset management company has an almost perfect approval record for ETF applications. Additionally, a court ruling forced the SEC to reconsider competitors' applications, further solidifying confidence in the approval of applications.

Dennis Kelleher, president and CEO of the advocacy group Better Markets, stated that it is not surprising that BlackRock has quickly become a leader in the Bitcoin market.

"BlackRock has unparalleled market penetration, an unmatched distribution network, and strong marketing power, all of which provide false comfort to ordinary investors."

BlackRock's view on cryptocurrencies is starkly different from that of its biggest competitor, Vanguard. Founded by legendary investor Jack Bogle, Vanguard has stated that it has no plans to launch a spot Bitcoin ETF and will not offer crypto-related products on its brokerage platform. The asset management company, which manages $8.7 trillion in assets, referred to Bitcoin in a recent blog post as "more of a speculation than an investment."

In addition to Bitcoin ETFs, BlackRock has partnered with some of the largest players in the cryptocurrency space. It holds a minority stake in stablecoin company Circle Internet Financial and manages over $25 billion in reserves in government money market funds that support Circle's USD Coin.

BlackRock has also collaborated with cryptocurrency exchange Coinbase Global, providing users of its Aladdin software platform direct access to cryptocurrencies through integration with Coinbase's institutional division. BlackRock also manages private Bitcoin trusts for professional clients. According to insiders, the assets of this trust have exceeded $250 million, and most clients have since moved their funds to the new ETF.

BlackRock's acceptance of Bitcoin has been gradual. During the pandemic, the company's global chief investment officer for fixed income, Rick Rieder, began allocating Bitcoin futures in its funds. According to insiders, BlackRock's head of digital assets, Robbie Mitchnick, also helped Fink transition into a Bitcoin believer.

The year 2022 marked a significant change in Fink's stance on digital assets.

In a conference call that April, he stated that his company was conducting extensive research in the cryptocurrency space and seeing increasing interest from clients.

That same month, BlackRock participated in a $400 million funding round for Circle, and by summer, BlackRock quietly launched a private trust—its first spot Bitcoin product aimed at U.S. institutional clients. The company provided seed funding for the fund with its own capital and scaled it up alongside external investors.

That year, BlackRock also partnered with Coinbase, allowing institutional clients holding Bitcoin on the cryptocurrency exchange to use its suite of software tools, Aladdin, to manage their portfolios and conduct risk analysis. Coinbase is also the custodian for its spot Bitcoin ETF.

Today, BlackRock's cryptocurrency ambitions are no longer limited to Bitcoin, as the asset management company is submitting a pending application to the SEC to launch an ETF that holds Ethereum, the second-largest cryptocurrency by market capitalization and the native token on the Ethereum blockchain. The regulatory deadline is in May, when the agency will make decisions on multiple such applications.