BlackRock Vows To Democratize Crypto Opportunities

BlackRock Inc. Co-Founder and CEO Larry Fink wants to "democratize" Bitcoin through a spot trading Bitcoin exchange-traded fund (ETF)

Fink filed an application for the spot Bitcoin ETF on June 15 with the Securities and Exchange Commission (SEC). The application was rejected due to concerns regarding market manipulation. 

"We believe we have a responsibility to democratize investing. We've done a great job, and the role of ETFs in the world is transforming investing. And we're only at the beginning of that," Fink said regarding the ETF filing. 

BlackRock's spot Bitcoin ETF application seemed to ignite a surge in cryptocurrencies and prompted numerous similar filings from other asset managers. The initial filing for the iShares Bitcoin Trust did not specify a management fee.

The crypto industry perceived BlackRock's participation and the proposed surveillance-sharing agreement in the filing as indicative of a changing momentum, even though the SEC turned down numerous similar fund applications. BlackRock is the world's largest asset management company with more than $9 trillion worth of assets under management.

Since BlackRock's filing, the value of Bitcoin, the world's largest cryptocurrency by market cap, has surged by more than 20%.

"We are working with our regulators because, as in any new market, if BlackRock's name is going to be on it, we're going to make sure that it's safe and sound and protected," Fink said.

BlackRock's action has served as an inspiration for other financial institutions, such as Fidelity Investments, Invesco Ltd. and WisdomTree Inc., prompting them to resubmit their own applications for similar ETFs.

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Fink's History With Bitcoin 

In 2017, Fink criticized cryptocurrencies, attributing their popularity primarily to money laundering. He earlier referred to Bitcoin as an "index of money laundering." 

But because of increased interest from clients and the substantial transaction costs, BlackRock became motivated to explore potential involvement in the crypto space. Fink acknowledged that cryptocurrencies could play a role in diversifying investor portfolios.

Democratizing new traditionally exclusive areas to invest in is becoming increasingly popular in recent years. For example, platforms like StartEngine and Wefunder allow anyone to invest in startups like gaming marketplace startup Gameflip, StartEngine itself, and hundreds of other private companies.

"It has a differentiating value versus other asset classes, but more importantly, because it's so international it's going to transcend any one currency," Fink said. He also called Bitcoin the new "digital gold" and "an international asset."

"It's [Bitcoin] not based on any one currency, and so it can represent an asset that people can play as an alternative," Fink said in a Fox Business interview. 

After Fink's interview, numerous cryptocurrency users on social media responded with enthusiasm, with one person suggesting that his statements might trigger a significant surge in the value of specific assets — a phenomenon dubbed the "Fink Pump."

The billionaire also believes that Bitcoin can serve as a hedge against inflation and mitigate losses arising from unfavorable currency exchange rate movements. In the current economic climate, with most countries struggling to deal with tremendously high inflation rates, Bitcoin's potential as an inflation hedge is massive. The world's largest crypto token is already one of the best-performing assets year to date, having risen by over 76% so far this year. 

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ETF Rejection And Future Prospects 

An initial rejection from the SEC did not deter FInk's intent to "democratize Bitcoin" through the first-of-its-kind spot cryptocurrency ETF. BlackRock refiled its application for the alternative asset ETF after signing a surveillance-sharing agreement with Coinbase. 

BlackRock partnered with Coinbase, which is the largest cryptocurrency exchange in the U.S. in terms of trading volume, to ensure the SEC's concerns regarding money laundering are addressed — despite Coinbase's ongoing lawsuit with the federal regulatory authority. According to its Nasdaq Stock Exchange filing, Coinbase is vital in the U.S. Bitcoin market, accounting for approximately 56% of U.S. dollar Bitcoin trading.

"The Spot BTC SSA is expected to be a bilateral surveillance-sharing agreement between Nasdaq and Coinbase that is intended to supplement the exchange's market surveillance program," BlackRock stated in its latest filing. 

Will Fink Be Successful? 

SEC Chair Gary Gensler seems to be on a self-proclaimed warpath against the cryptocurrency industry, suing Coinbase and Binance — two of the largest crypto exchanges in the U.S. — last month. Gensler stated in a CNBC interview that "we don't need more digital currency."

While industry experts believe Fink is the only person influential and resourceful enough to go toe-to-toe with the SEC chair, the initial rejection of the spot Bitcoin ETF seems to be a major roadblock to BlackRock's plans. Many members of Congress disagree with Gensler's radical point of view, leading to them filing a "crypto stabilization bill" that could lead the U.S. to adopt a more tolerant attitude toward the cryptocurrency sector. 

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