As investors’ demands for exposure to the cryptocurrency market increase rapidly, BlackRock BLK plans to start offering crypto trading services to its investor clients. The news was first reported by Coindesk, citing three people with knowledge of the matter.
One of the people said that BLK, the world’s largest asset manager, wants to enter the crypto space with “client support trading and then with their own credit facility.” This means that BlackRock’s clients will be able to borrow from the investment manager by pledging crypto assets as collateral.
According to the source, BlackRock, which currently manages more than $10 trillion in assets for institutions, will probably give its clients (including public pension schemes, endowments and sovereign wealth funds) access to the crypto space through its integrated investment management platform, Aladdin.
However, it is not yet clear when the service will be unveiled.
Per the second person with knowledge of the matter, BlackRock has established a working group of around 20 people to evaluate Bitcoin and other digital assets on how the firm could profit from the space. The person said, “They see all the flow that everyone else is getting and want to start making some money from this.”
BlackRock’s plans to enter the crypto space do not come as a shock because the firm has already expressed its interest in the same earlier.
In 2021, the company’s CEO, Larry Fink, said that BLK was studying bitcoin to see if it could offer countercyclical benefits. Moreover, per a filing with the U.S. Securities and Exchange Commission, BlackRock has already explored bitcoin investments with derivative-based products on the Chicago Mercantile Exchange.
Notably, the asset manager’s interest in the crypto markets became even more evident when it announced plans of launching the iShares Blockchain and Tech ETF last month. The blockchain ETF is an exchange-traded fund that tracks an index composed of companies involved in the “development, innovation, and utilization of blockchain and crypto technologies” in the United States and abroad.
Our Take
BlackRock, with its broad product diversification, revenue mix and steadily improving assets under management balance, remains well-positioned for growth. The company’s GAAP revenues have witnessed a compound annual growth rate of 9.2% over the last seven years (2015-2021).
Given BLK’s efforts to strengthen the iShares and ETF operations, and increased focus on the active equity business, its top line is anticipated to keep improving in the quarters ahead.
Over the past year, shares of BlackRock have rallied 4.2% against the 5.8% decline of the industry.
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Currently, BlackRock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Digital Assets and the Competitive Landscape
Until July 2020, the Office of the Comptroller of the Currency did not grant permission to banks in the United States to hold cryptocurrencies. The amendment post-July gave banks the go-ahead to begin exploring cryptocurrency operations.
A few years ago, banks were not very interested in the crypto and digital asset space. But now, after witnessing an increase in demand for the emerging market, banks and financial institutions are slowly embracing cryptocurrencies.
In July 2021, JPMorgan JPM became the first major bank in the United States to allow its financial advisors to give all its wealth-management clients access to cryptocurrency funds. Next month, it came to light that JPMorgan was offering its Private Bank wealth management customers access to an in-house passively managed bitcoin fund. The offering was being made in partnership with bitcoin powerhouse New York Digital Investment Group.
JPMorgan has launched a division focused on digital assets named Onyx. The Wall Street giant has even launched its own digital currency, JPM Coin.
Among others, Goldman Sachs GS launched trading with non-deliverable forwards, i.e., derivatives tied to Bitcoin’s price, which are cash-settled. Goldman Sachs has been shielding itself from cryptocurrency fluctuations by trading Bitcoin futures in block trades on CME Group Inc., with Cumberland DRW as its trading partner.
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