In his annual letter to shareholders,
CEO Larry Fink noted that his company was looking into cryptocurrencies. He listed some of the benefits of this emerging category, such as faster settlements and lower costs for international transactions.
Now Fink is taking action. This Thursday, BlackRock (ticker: BLK) announced a partnership with
base of coins
(COIN), a major cryptocurrency platform, involving BlackRock’s Aladdin investment management system. On the news, shares of Coinbase were up 10% at $89. But BlackRock shares rose less than 1%.
BlackRock’s Aladdin users will be able to include Coinbase holdings, just Bitcoin to begin with, when managing portfolios and performing risk analysis. According to the press release: “This integration will deliver institutional-grade capabilities for managing crypto exposure throughout the investment lifecycle from compliance, portfolio management, trading, trading, and risk management. “.
BlackRock did not comment to Barron’s adviser on whether this partnership includes Aladdin users in the wealth management industry, although the focus is clearly on large institutional investment managers at least to begin with.
Given the sheer size of BlackRock, this push into crypto will be a validator for that extra volatile asset class.
Earlier in the year, a Nasdaq survey of 500 investment advisors showed optimism for cryptocurrencies. For those with clients who already hold digital currencies or are considering them, some 86% said they planned to increase their holdings.
But it is likely that some of the enthusiasm for cryptocurrencies has faded due to the exhausting fall in values. There have also been a number of bankruptcies in the industry, such as with Voyager Digital and Celsius Network.
The upheaval has encouraged lawmakers to impose more regulations. This week, Sens. Debbie Stabenow (D., Mich.) and John Boozman (R., Ark.) introduced a bill that would use the Commodity Futures Trading Commission to enforce cryptocurrency rules. The initial focus will be on Bitcoin and Ether.
Meanwhile, the Securities and Exchange Commission has been filing insider trading charges against crypto investors.
Such actions may eventually provide some comfort to investors and compliance departments that cryptocurrencies are not operating outside the bounds of securities regulation and supervision. For now, many companies are very cautious.
“We recognize that there is considerable interest in cryptocurrencies, particularly in certain market segments, and will consider introducing direct access to cryptocurrencies when there is more regulatory clarity,” a Schwab spokesperson told Barron’s Advisor. The firm currently makes available trusts, mutual funds, and ETFs that provide exposure to cryptocurrencies. There is also access to trade Bitcoin futures for clients who meet certain requirements.
Meanwhile, the volatility of cryptocurrencies may also convince investors that they need sound advice from advisors when venturing into this asset class.
An advisor describes his role in crypto investments in terms quite similar to that of any financial asset.
“As a company that predominantly caters to high and ultra-high net worth clients in the arts and entertainment space, we’ve seen a lot of interest in digital assets,” says Tyler O. Martin, director of financial planning at Stonebridge Wealth. Management. “
Our recommendations for this emerging asset class are similar to those for other asset classes.” “We help our clients identify their objectives and present various alternatives. There are crypto strategies designed for tax efficiency. There are passive indexing strategies. There are active strategies that focus on the frontier of digital assets. It all boils down to the client’s objective, risk tolerance, and impact on their larger plan.”
Tom Taulli is a freelance writer, author, and former broker. He is also the author of the book, The personal finance guide for tech professionals.