BlackRock partners with Coinbase to expand into crypto

BlackRock Inc. is partnering with Coinbase Global Inc. to make it easier for institutional investors to manage and trade bitcoin, marking a major push into cryptocurrencies for the world’s largest asset manager.

Top clients will be able to use BlackRock’s Aladdin investment management system to oversee their exposure to bitcoin along with other portfolio assets such as stocks and bonds, and to facilitate financing and trading on Coinbase’s exchange, according to a statement Thursday. The focus of the partnership with Coinbase, the biggest US crypto-trading platform, “will initially be on bitcoin,” BlackRock said.

The move underscores how Wall Street’s traditional financial players are expanding deeper into crypto and related technologies, even after this year’s meltdown in such assets. Bitcoin has lost about half of its value in 2022, while the collapse of the Terra ecosystem and Three Arrows Capital have raised questions about the resilience of the market and prompted increased regulatory scrutiny. 

Coinbase is facing a probe by the Securities and Exchange Commission into whether the company let Americans trade digital assets that should have been registered as securities. BlackRock chose to partner with Coinbase because of its scale in the market and role in providing trading, custody services, prime brokerage and reporting capabilities. The services will be available for clients of both companies.

“Our institutional clients are increasingly interested in gaining exposure to digital-asset markets and are focused on how to efficiently manage the operational life cycle of these assets,” Joseph Chalom, BlackRock’s global head of strategic ecosystem partnerships, said in the statement.

Institutional investors accounted for about three-quarters of the $309 billion in trading volume on Coinbase in the first quarter, the company disclosed in May. Coinbase clients include hedge funds, corporate treasuries and asset managers.

“The Coinbase partnership between BlackRock and Aladdin is an exciting milestone for our firm,” Brett Tejpaul, head of Coinbase Institutional, and Greg Tusar, vice president of institutional product, said in a separate statement. “We are committed to pushing the industry forward and creating new access points as institutional crypto adoption continues to rapidly accelerate.”

For BlackRock, the partnership is the next step in a wider strategy to expand into digital assets. Chief Executive Larry Fink said in March that the firm was studying the growing importance of digital assets and stablecoins and how they can be used to help clients. The following month, the company joined a group of investors in Circle Internet Financial, the issuer of USD Coin, and said it would seek to serve as a primary manager of the stablecoin’s cash reserves.