BlackRock is making a push into crypto currency by partnering with Coinbase, the biggest crypto currency exchange, to meet institutional demand.
The world’s largest asset manager will enable clients to use its Aladdin investment management system to buy, sell and monitor their crypto currency holdings via Coinbase’s exchange.
The initial focus will be on bitcoin and the services will be available to clients of both firms.
“Our institutional clients are increasingly interested in gaining exposure to digital-asset markets and are focused on how to efficiently manage the operational life cycle of these assets,” Joseph Chalom, BlackRock’s global head of strategic ecosystem partnerships, said in the statement.
Institutional investors accounted for about three-quarters of the $309 billion in trading volume on Coinbase in the first quarter, said Coinbase whose clients include hedge funds, corporate treasuries and asset managers.
BlackRock chose to partner with Coinbase because of its scale in the market and role in providing trading, custody services, prime brokerage and reporting capabilities.
The firm’s move reflects the growing interest of traditional financial players in crypto and related technologies, despite this year’s tumultuous time.
However, bitcoin has lost about half of its value in 2022, while the collapse of the Terra ecosystem and hedge fund Three Arrows Capital have raised questions about the resilience of the market and prompted increased regulatory scrutiny.
Coinbase is facing a probe by the US Securities and Exchange Commission into whether the company let Americans trade digital assets that should have been registered as securities.
“While small and retail investors have been virtually shaken out of the space over the past few months, institutions are now making a comeback,” said Mikkel Mørch, executive Director at Digital Asset Investment Fund ARK36.
He added, “Evidently, big players like BlackRock see neither the recent slump in prices nor the waves of bankruptcies among crypto companies as evidence that it’s over for cryptocurrencies or that there is something fundamentally wrong with this asset class.”
Because of a much longer investment horizon than retail, institutional investors aren’t scared of short-term volatility and focus on the long-term growth the cryptocurrency market is bound to experience.”
“Importantly, Coinbase’s partnership with BlackRock provides yet another entry point for institutions to meaningfully engage with the crypto space. As the infrastructure for institutional investors to place their bets on digital assets grow, so will their involvement in this market. Crypto is simply inevitable at this point.”