BlackRock approaches 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 toward cryptocurrencies gives way to ambitions to become a significant player in the digital asset market.

The US group’s bitcoin exchange-traded spot fund has accumulated $16.7 billion in assets since it launched four months ago, leaving it less than $1 billion behind market leader Grayscale, which had an early lead of 10 years and US$28 billion.

In parallel, BlackRock also launched the fastest-growing tokenized Treasury fund, which crypto hedge funds and market makers are beginning to use as collateral for trading coins and tokens.

The measures represent a drastic change, driven by growing customer interest and the rapid growth of digital assets, from just seven years ago, when Chief Executive Larry Fink called bitcoin “an index of money laundering.”

At the launch of the spot ETF in January, Fink described himself as “very optimistic about the long-term viability of bitcoin” and said its fundamentals were a crucial part of the “technological revolution in financial markets.”

“BlackRock has always served the interests of its clients, so why should crypto be any different?” said Lee Reiners, professor at the Duke Financial Economics Center. “That doesn’t mean they are true believers. Crypto is not on your balance sheet and if crypto goes to zero, the impact on your finances will be negligible.”

The asset manager was the biggest beneficiary of the Securities and Exchange Commission’s decision in January to approve ETFs that invest directly in bitcoin, after rejecting them for years.

Fidelity trailed behind in third place, attracting $9.3 billion in assets. The pair were helped by large exits at Grayscale, which converted a previous Bitcoin product into an ETF and 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 – has not only chosen not to launch a bitcoin ETF, but has also refused to sell any 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 active. BlackRock’s global head of strategic ecosystem partnerships, Joseph Chalom, now sits on Securitize’s board.

Two years ago, BlackRock made a minority investment in Circle, which runs 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 it’s understood that it’s been a multi-year, very deliberate journey to bring the same institutional quality that sets BlackRock apart to this ecosystem, and for us that’s more important than rushing,” Rob Goldstein, chief operating officer of BlackRock told the Financial Times.

Still, BlackRock’s arrival in other parts of the crypto 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 surpassed rival Franklin Templeton’s tokenized fund as 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 yield to holders, unlike Buidl.

But others say BlackRock’s long-term bet is to speed up the settlement of trades and the transfer of its funds, making it 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 specific money market fund, said Robert Mitchnick, head of digital assets at BlackRock. This private blockchain product helped lay the foundation for Buidl.

“This work was extremely important. . . We believe the biggest opportunity in this space was around public blockchains,” said Mitchnick.

At the end of the month, the US will begin requiring the vast majority of trades to be settled within one business day, but executives doubt further progress can be made for investors until large parts of the financial system are placed on blockchains, that can settle businesses. In a matter of minutes.

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

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