BlackRock partners with Coinbase to expand the crypto market

(Bloomberg) — BlackRock Inc. is participating. With Coinbase Global Inc. To make it easier for institutional investors to manage and trade Bitcoin, with the world’s largest asset manager moving to a cryptocurrency market that has been hit by price drops and government investigations.

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Coinbase was up 15% to $92.61 at 1:20 pm in New York. The partnership with BlackRock offers some relief to the largest US cryptocurrency exchange, whose stock has lost more than two-thirds of its value this year as of Wednesday.

Top BlackRock customers will be able to use Aladdin’s investment management system to oversee their exposure to bitcoin along with other wallet assets such as stocks and bonds, and to facilitate funding and trading on the Coinbase exchange, according to a statement Thursday. BlackRock said that the focus of the partnership with Coinbase, the largest cryptocurrency exchange in the United States, “will initially be on Bitcoin.”

BlackRock’s move is deepening the involvement of traditional Wall Street financial players in crypto and related technologies, even after a crash this year in such assets. Bitcoin lost about half its value in 2022, while the collapse of the Terra ecosystem and hedge fund Three Arrows Capital raised questions about market resilience and prompted increased regulatory scrutiny.

Read more: Terra co-founder’s home broken into as Korea expands crypto probe

Coinbase is facing an investigation by the US Securities and Exchange Commission over whether the company is allowing Americans to trade digital assets that should have been registered as securities. BlackRock chose to partner with Coinbase due to its size in the market and its role in providing trading, custody services, prime brokerage, and reporting capabilities. The services will be available to customers of both companies.

Owen Lau, an analyst with Oppenheimer & Associates, said the regulatory risks from the partnership are manageable because it starts with Bitcoin, which has a clearer regulatory status in Washington than other digital assets.

Lau said in a phone interview that the partnership is “an affirmation of the future of blockchain and digital assets and also an affirmation of Coinbase’s reputation.” “It is a huge plus for the industry and also for Coinbase.”

SEE ALSO: Coinbase’s BlackRock Agreement Boosts Crypto Case, Burns Short

The announcement shows that seasoned investors are becoming more comfortable with the cryptocurrency market.

“Our institutional clients are increasingly interested in gaining exposure to the digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets,” Joseph Chalom, Global Head of Strategic Ecosystem Partnerships at BlackRock, said in the statement.

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

“The Coinbase partnership between BlackRock and Aladdin is an exciting milestone for our company,” Brett Tiebull, Coinbase Institutional President, and Greg Tusar, Vice President of Institutional Product, said in a separate statement. “We are committed to driving the industry forward and creating new access points as the adoption of enterprise encryption continues to accelerate rapidly.”

For BlackRock, the partnership is the next step in a broader strategy to expand into digital assets. CEO Larry Fink said in March that the company is studying the growing importance of digital assets and stablecoins and how they can be used to help customers. The following month, the company joined a group of investors in Circle Internet Financial, the issuer of the US dollar, and said it would seek to serve as the primary manager of the stablecoin cash reserves.

(The stock price is updated in the second paragraph, the Oppenheimer analyst starts at the sixth.)

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