Top BlackRock clients will be able to use its 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.
BlackRock’s move deepens the involvement of Wall Street’s traditional financial players in 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 hedge fund Three Arrows Capital have raised questions about the resilience of the market and prompted increased regulatory scrutiny.
Coinbase is facing a probe by the US 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.
The regulatory risks from the partnership are manageable because it’s starting with Bitcoin, which has clearer regulatory status in Washington than other digital assets, said Oppenheimer & Co. analyst Owen Lau, who has the equivalent of a buy rating on Coinbase shares.
The partnership is “a validation of the future of blockchain and digital assets and also a validation of Coinbase’s reputation,” Lau said in a phone interview. “It’s a big plus for the industry and also for Coinbase.”
The announcement shows sophisticated investors are growing more comfortable with the crypto market.
