Larry Fink doubles back on Bitcoin

By Sam Sutton and Aubree Eliza Weaver

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Five years after calling Bitcoin an “ index of money laundering ,” BlackRock’s Larry Fink is getting laser eyes.

BlackRock on Thursday announced it was launching an investment trust for qualified investors (read: wealthy, institutional) that will track the price of Bitcoin. It’s the latest in a series of maneuvers that has put BlackRock, an $8.5 trillion investment firm that assisted the Federal Reserve in consecutive financial system meltdowns, in a position to exert tremendous influence in markets that its top executive once derided as criminal.

In April, BlackRock entered a strategic partnership with Circle to explore how its dollar-pegged stablecoin USDC — a key element of crypto’s market infrastructure — could be put to work in capital markets. The firm entered a separate partnership with Coinbase last week that linked BlackRock’s portfolio management system to the crypto exchange’s institutional investment platform.

Whatever concerns Fink expressed in the past, BlackRock is making its move even as the SEC , CFTC , banking regulators and law enforcement crack down crypto businesses following a market collapse that erased roughly $2 trillion of value in a matter of months.

“Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities,” BlackRock said in a statement announcing the investment trust.

To be clear, those investors are interested even though Washington hasn’t come up with a uniform set of rules for crypto marketplaces. Given BlackRock’s deep pockets and considerable sway, that raises the question — what steps will it take to influence or shape conversations around crypto rulemaking or legislation?

That’s hard to answer. BlackRock didn’t respond to requests for comment.

Despite whatever access BlackRock’s name might afford its crypto partners, the firm is unlikely to “enter the fray” when it comes to Washington policy battles around specific products like stablecoins or central bank digital currencies, said Dante Disparte, Circle’s chief strategy officer and head of global policy.

Still, some crypto-friendly investment managers say they’re hopeful the new investment trust will boost the industry in its battles with market regulators over digital asset investment funds — including a Bitcoin ETF.

The SEC has repeatedly rejected Bitcoin exchange-traded fund proposals from firms like Grayscale Investments, Fidelity Investments and SkyBridge Capital on the grounds that the vehicles couldn’t protect investors from fraud or manipulation. ETFs linked to Bitcoin futures contracts have been approved.

“One of the biggest, most established traditional finance players has made a major entrance into crypto space (and possibly the bitcoin ETF sweepstakes, too, as a trust can be converted into an ETF),” said SkyBridge Founder and Managing Partner Anthony Scaramucci — who briefly served as former President Donald Trump’s communications director in 2017. “This is a positive development for the current regulatory environment.”

A Bitcoin ETF might be beside the point at this stage, said Steven McClurg, co-founder and CIO at digital asset fund manager Valkyrie Investments. (Like every other Bitcoin ETF application, Valkyrie’s attempt to convert its Bitcoin trust into an ETF was blocked by the SEC).

“As more institutional products enter the ecosystem, a Bitcoin ETF becomes less relevant,” McClurg said. “Most institutional investors do not use ETFs for market access.”

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STABLE(?)COINS — Yale School of Management’s Program on Financial Stability’s Steven Kelly for FT: “The three biggest stablecoins — Tether’s tether, Circle’s USDC, and Paxos and Binance’s BUSD — are currently in a safety-measuring contest … [The issuers’ disclosures highlight] the problem that underlies the stablecoin story. They can only import stability, not manufacture it, making them a net drain of stability from the financial system.”

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