BlackRock’s Circle investment could be a transformative moment for digital assets

April 13, 2022

It was a mere 5 years ago that BlackRock Chairman and CEO Larry Fink called Bitcoin an “index of money laundering.”

Yet today, in what could well be a transformative development for digital assets, BlackRock entered into a strategic partnership with Boston-based Circle. As part of the deal, BlackRock will become a primary asset manager of USDC cash reserves—the fiat currency backing the Circle-issued USDC stablecoin. This development was after announced after a $400 million funding round raised by Circle from BlackRock, Fidelity Management and Research, Marshall Wace LLP and Fin Capital.

While particulars of the deal are largely under wraps, as reported by Forbes, BlackRock seems to be looking beyond cryptocurrencies and stablecoins and towards asset tokenization and permissioned blockchains. This partnership is noteworthy because while BlackRock began trading Bitcoin futures early last year, this is the first digital assets engagement that involves the balance sheet of BlackRock, Inc. itself.

The implication of this step for the legitimization of digital currencies cannot be understated, given Mr Fink’s standing on Wall Street and the larger financial industry.

The BlackRock chairman’s annual letter to CEOs is a template for what trends corporate boardrooms can expect from their investors going forward. During the financial crisis, the company was even referred to as the fourth branch of government.

Interestingly, the volatility in Ukraine attributed to Mr Fink’s change in stand on digital assets. With the conflict prompting governments around the world to re-evaluate their currency dependencies, Mr Fink saw the place of a secure global digital payment system. In his March letter to shareholders, he elaborated, “Finally, a less discussed aspect of the war is its potential impact on accelerating digital currencies. The war will prompt countries to re-evaluate their currency dependencies. Even before the war, several governments were looking to play a more active role in digital currencies and define the regulatory frameworks under which they operate. The US central bank, for example, recently launched a study to examine the potential implications of a US digital dollar. A global digital payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption. Digital currencies can also help bring down costs of cross-border payments, for example when expatriate workers send earnings back to their families. As we see increasing interest from our clients, BlackRock is studying digital currencies, stablecoins and the underlying technologies to understand how they can help us serve our clients.”

Read the full text of Mr Fink’s letter to shareholders here

 

by Anil George
Avid follower of all things tech. In between his quest for the ultimate gizmo, Anil fiddles with light meters, collects rare books and feeds his fetish for Jap horror movies. As Managing Editor of T3 Middle East for the GCC, Anil oversees content direction across print and digital. He was a CES 2020 Innovation Awards Judge, reprising his role as an Innovation Awards Judge at CES 2018, CES 2017, 2016 and 2015. Anil is also the Middle East's first Brand Ambassador for Ashdown Engineering. Reach him at: editor@t3me.com.