BlackRock pushes into crypto market with bitcoin private trust

BlackRock has announced the launch of a spot bitcoin private trust, deepening a push into digital assets as the crypto industry is recovering from the fallout of a credit crisis.

The world’s largest asset manager said in a blog post on Thursday that the private trust would be available only to institutional clients in the US, but gave few other details.

US regulators have repeatedly rejected proposals to offer spot bitcoin exchange traded funds that would be open to retail investors, citing the need for investor protections.

The move by BlackRock potentially puts the investment house, whose chief executive Larry Fink has publicly criticised bitcoin, into competition with Grayscale, the world’s biggest investment vehicle for cryptocurrencies.

It comes as the crypto industry deals with the fallout of an acute drop in the price of assets like bitcoin, which has lost two-thirds of its value since its all-time high last November. The total market capitalisation of cryptocurrencies dropped from around $3.2tn to less than $1tn in that time.

“Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities”, BlackRock said in a statement.

“The launch of BlackRock’s bitcoin fund is a sign of how far crypto has matured as an asset class”, said Sui Chung, chief executive of crypto index provider CF Benchmarks.

Earlier this week BlackRock agreed to join its Aladdin investment technology platform to Coinbase, the crypto exchange. The network is widely-used in the fund management industry to link asset managers, insurers and banks to markets.

Other fund managers are also dipping their toes into the crypto market. In recent months Schroders picked up a stake in the crypto-focused fund manager Forteus while Fidelity announced it would allow investors to add cryptocurrencies to their portfolios in 401(k) retirement schemes.

However, BlackRock’s pivot to digital assets marks a significant evolution from previous comments made by Fink. In 2017, the chief executive said “bitcoin just shows you how much demand for money laundering there is in the world”, adding “that’s all it is”.

BlackRock’s bitcoin embrace also follows the firm’s previous calls for global environmental, social and governance standards in a bid to bolster sustainability efforts. Bitcoin — which runs on an energy intensive blockchain system — has been criticised for its carbon footprint and broader impact on the environment.