BlackRock is closing in on the crown of the world’s largest bitcoin fund

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BlackRock is closing in on the crown of managing the world’s largest bitcoin fund as the asset manager’s initial skepticism about cryptocurrencies gives way to ambitions to become a significant player in the digital asset market.

The American group’s commercial bitcoin The exchange-traded fund has raised $16.7 billion in assets since it launched four months ago, placing it within $1 billion of market leader Grayscale, which has enjoyed a 10-year, $28 billion lead of dollars.

Next to that Black rock also launched the fastest-growing tokenized Treasury fund, which crypto hedge funds and market makers are starting to use as collateral for exchanging coins and tokens.

The moves represent a stark shift, driven by growing customer interest and the rapid growth of digital assets, from just seven years ago, when CEO Larry Fink called bitcoin “an index of money laundering.”

At the January launch of the spot ETF, Fink described he described himself as “very optimistic about the long-term sustainability of bitcoin” and said that its foundations are a crucial part of the “technological revolution in the financial market”.

“BlackRock has always been sensitive to the interests of its clients, so why should cryptocurrencies be any different,” said Lee Reiners, a professor at the Duke Financial Economics Center. “But this does not mean that they are true believers. Cryptocurrencies are not on their balance sheet and if cryptocurrencies went to zero, the impact on their finances would be negligible.”

The asset manager was the biggest beneficiary of the Securities and Exchange Commission’s approval decision in January ETFs who invest directly in bitcoin, after having rejected them for years.

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Fidelity came in third place, attracting $9.3 billion in assets. The two were helped by large outflows at Grayscale, which converted an earlier bitcoin product into an ETF and had charged a much higher management fee of 1.5%. BlackRock charges 0.25%.

It also contrasts with the approach taken by some of BlackRock’s biggest rivals. Vanguard, like BlackRock, an ETF giant, not only chose not to launch a bitcoin ETF, but also refused to sell third-party bitcoin funds to its brokerage clients.

BlackRock’s growing confidence in the digital asset market is also highlighted by its support of Securitize, joining Tradeweb and Hamilton Lane in a $47 million fundraising round for the platform, which uses digital tokens to represent assets. BlackRock’s global head of strategic partnerships for ecosystems, Joseph Chalom, now serves on Securitize’s board of directors.

Two years ago BlackRock made a minority investment in Circle, which operates the world’s second-largest stablecoin, USDC. A stablecoin is a type of digital currency pegged to a sovereign currency, such as the US dollar.

“It’s all coming together now, but I hope you understand that this has been a very deliberate, multi-year journey to bring the same institutional quality that differentiates BlackRock into this ecosystem, and that’s more important to us than rushing it,” Rob Goldstein, BlackRock’s chief operating officer told the Financial Times.

Even so, BlackRock’s arrival in other parts of the cryptocurrency market has energized investors. In March it launched a tokenized Treasury fund on a public blockchain, Ethereum, allowing all users to track trades on a digital ledger.

The BlackRock USD Institutional Digital Liquidity fund, or Buidl, has already overtaken rival Franklin Templeton’s tokenized fund to become the market’s largest, attracting $382 million compared to Franklin’s $368 million.

Traders and prime brokers have started using Buidl as a way to obtain high-quality collateral for cryptocurrency trading. Most use stablecoins like Tether’s USDC or USDT but they do not offer a yield to holders, unlike Buidl.

But others say BlackRock’s long-term bet is to speed up the closing of deals and the transfer of its funds, making them more attractive to investors who want immediate access to their money.

The asset manager had previously tested tokenization using a private JPMorgan blockchain to track assets and transactions involving a particular money market fund, said Robert Mitchnick, BlackRock’s head of digital assets. That private blockchain product helped lay the foundation for Buidl.

“That work was critically important. . . We believe the biggest opportunity here is in public blockchains,” Mitchnick said.

At the end of the month the United States will begin requesting most operations pay within one working day But executives doubt further progress can be made for investors until much of the financial system is turned over to blockchains, which can close deals in minutes.

“There will come a point where the current technological setup won’t work,” said Ralf Kubli, a board member of the Casper Association, a blockchain project based in Switzerland.

Large asset managers around the world are “thinking very deeply about what this technology can do for them,” he added.

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