Could the world’s largest asset manager overseeing $10 trillion in client funds finally be warming up to crypto?
Few financial figures command the kind of attention of Larry Fink.
The BlackRock chairman’s annual letter to CEOs sets forth what trends corporate boardrooms can expect from the their investors going forward. During the financial crisis, the company was even referred to as the “fourth branch of government“.
So when Fink indicated on Thursday he may be setting aside some of his suspicions surrounding to crypto assets, it’s a sign of a legitimacy from one of the true whales of Wall Street.
“BlackRock is studying digital currencies, stablecoins and the underlying technologies to understand how they can help us serve our clients,” he told shareholders in a letter.
Importanly the comments reflect Fink’s own personal views, as the money manager doesn’t per se take a house view on crypto. For example, BlackRock began trading Bitcoin futures early last year.
Fink, who famously called the world’s best known cryptocurrency an “index of money laundering” five years ago, attributed his evolving stance to the Ukraine war.
The conflict has become a catalyst prompting governments around the world to re-evaluate their currency dependencies in view of the crippling sanctions imposed by western allies on Russia, sanctions that only have teeth due to linkages in the global financial system.
By comparison, crypto—and decentralized finance more broadly—are designed with the purpose of circumventing traditional gatekeepers like governments and centrall banks that impinge on financial freedom.
This is one reason they have been a vehicle for concealing the origin of illegally gotten gains.
Russia’s feared pivot
“A global digital payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption,” Fink countered, arguing digital currencies can also help bring down costs of cross-border payments.
The BlackRock CEO cited the U.S. Federal Reserve decision to publish earlier this year a study examining the implications of a digital dollar.
Fed chair Jay Powell has taken a conservative approach to these so-called central bank digital currencies, or CBDCs, due to the oversized importance of the greenback as the world’s reserve currency.
By comparison the European Central Bank launched its own two-year pilot last July, with sources in its Frankfurt headquarters telling Fortune at the time it was acting at the behest of numerous finance ministers from eurozone governments.
The Fed and the ECB, two largest monetary authorities in the western world have been reacting to pressure from China, where a digital yuan was piloted for foreigners during the recent Winter Olympics. Beijing itself wants to crack down on decentralized finance as it represents a threat to its one-party rule.
The war in Ukraine is the latest accelerant that can hasten the trend towards crypto.
Concerns have arisen Russia, the eleventh largest in the world, might attempt a pivot to crypto after its access to the SWIFT global payment system was withdrawn as penalty for its invasion.
The EU Commission said on March 11th it would make sure that the country and its ellites cannot use crypto assets to circumvent economic reprisals put in place.
“While sanctions evasion via crypto currencies is harder to detect in the first place, once detected it is very easy to investigate, because crypto transactions are fully traceable and it is practically impossible to alter that,” an EU official told Fortune.
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