Coinbase strikes deal to give BlackRock customers access to crypto
Coinbase has announced an agreement with BlackRock to give the asset manager’s clients more transparent access to digital asset markets, in the latest sign of how a growing number of traditional investors are getting into crypto.
San Francisco-based Coinbase said on Thursday it would connect to Aladdin, BlackRock’s investment technology platform. The system, which provides essential plumbing for the global investment industry, will give clients of the world’s largest asset manager direct access to crypto. The first available token will be bitcoin, but others may arrive later.
The tie-up marks a victory for Coinbase, which has come under intense pressure since its direct listing last year due to falling crypto prices and declining trading volumes. It also shows how, despite the turmoil in crypto markets this year, some institutional investors are more actively considering digital token allocations.
“Our institutional clients are increasingly interested in exposure to digital asset markets and focused on how to effectively manage the operational lifecycle of these assets,” said Joseph Chalom, Global Head of Strategic Partnerships at ecosystem at BlackRock.
Coinbase shares initially rose 44% after Wall Street opened, before paring their gain to around 15%. However, stocks remain down more than 60% in 2022.
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The BlackRock pact has been “a major confidence boost and a much-needed positive for Coinbase after a brutal year,” said Wedbush Securities analyst Dan Ives.
Coinbase in June scrapped its growth plans and cut a fifth of its workforce — more than a thousand people — due to slowing crypto markets. Adding to his woes, US prosecutors last month charged a former employee and two of his associates with insider trading.
David Trainer, managing director of investment research firm New Constructs, said he was skeptical of the Coinbase-BlackRock venture. “The idea that institutions need more access to crypto seems outlandish to us, because any institution that wanted access to it could get it through other channels,” he said.
Coinbase said it would provide BlackRock customers with “crypto trading, custody, prime brokerage and reporting capabilities,” adding that the combination was “an exciting step for our business.”
BlackRock’s Aladdin system is one of the most widely used pieces of technology in the financial services industry, connecting investors to markets and measuring risk. It is used by asset managers, banks, insurers, pension funds and corporations.
The deal marks a stark contrast to the position formerly held by BlackRock chief executive Larry Fink on crypto. Speaking at a meeting of the Institute of International Finance in October 2017, he said: “Bitcoin shows you how much demand for money laundering exists in the world. That’s all there is to it. is.
However, during an earnings call for the second quarter of this year, Fink said the asset manager is still seeing institutional client interest in crypto trading. He had studied the ecosystem of digital assets, “especially in areas that are relevant to our customers, including stablecoins, crypto assets, tokenization, permissioned blockchains.”
In April, alongside asset managers including Fidelity and Marshall
Wace, BlackRock announced a minority investment in Circle, a
Internet payments and treasury infrastructure group which is the issuer
of the stablecoin known as USDC.
A stablecoin is a type of cryptocurrency tied to an asset such as the US dollar and acts as a bridge between traditional and crypto markets. BlackRock became the primary manager of Circle’s USDC cash reserves, with assets fully invested in short-term US Treasuries.