What to Know About the BlackRock, Coinbase Partnership

Institutional acceptance of cryptocurrency is happening, albeit slowly. The BlackRock-Coinbase partnership to extend institutional accessibility to cryptocurrency is a massive step in that direction.

While it may largely seem symbolic, BlackRock seeking a partner in the crypto space is indicative of much wider intrigue and even acceptance of cryptocurrency as a valid asset holding.

The Partnership

On August 4, Coinbase announced that it had been selected to partner with BlackRock to provide institutional clients with the cryptoeconomy. BlackRock is the world’s largest asset manager; which makes this partnership the largest and most significant indicator of widespread adoption of cryptocurrency to happen thus far.

The partnership is meant to provide institutional clients of BlackRock, through Aladdin®, an end-to-end investment platform, direct access to crypto. The connectivity would be provided by Coinbase Prime, a vertical of Coinbase built for institutions to provide advanced agency trading and other products meant to support the entire blockchain transaction lifecycle. Starting with Bitcoin, Coinbase prime will provide BlackRock the security, insurance, and compliance requirements necessary to help their investors make savvy decisions in the crypto market.

“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets,” said Joseph Chalom, Global Head of Strategic Ecosystem Partnerships at BlackRock. “This connectivity with Aladdin will allow clients to manage their bitcoin exposures directly in their existing portfolio management and trading workflows for a whole portfolio view of risk across asset classes.”

Just Thursday, BlackRock announced the creation of a spot bitcoin private trust. “Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities,” wrote the announcement.

The Far Reaching Implications

It may seem trivial, nay inevitable, that a partnership like this would form eventually. But BlackRock, which holds $8.5 trillion assets under management, is a nontrivial giant in the investment world. While the FED may incorporate crypto to regulate it, and the SEC will name crypto a security to regulate it, BlackRock’s decision to integrate with Coinbase is a big indicator of future widespread crypto adoption by institutional investors. In other words, it shows that crypto is here to stay.

Aladdin, BlackRock’s institutional offering, has over 200 customers including insurers, pensions, corporations, asset managers, and banks as its clients. Moving forward, all of these customers will have access to Coinbase Prime.

Widespread institutional adoption of cryptocurrency is the final frontier of crypto acceptance. It furthers the legitimacy, the ethos, behind cryptocurrency as a true asset. This isn’t the first instance of a major bank dipping its toe into cryptocurrency. Earlier this year, Goldman Sachs began to offer loans collateralized by Bitcoin owned by the borrower — another strong indicator that cryptocurrency is transitioning, by institutions, into a true asset.

It also indicates that investors are not nearly as shook by the recent upheaval in crypto as originally thought. Since June, three major crypto lenders have declared bankruptcy, two major criminal cases alleging crypto and NFT insider trading have been brought, and the Treasury recently blacklisted currency mixer Tornado Cash. The Ethereum merge is becoming a more divisive topic by the day, Cardano is working on its hard fork, and projections of Degrain claim that it could be the most profitable token of 2022. For all intents and purposes, the crypto environment has never been more volatile.

Yet, investors and curious onlookers seem much less turned off to crypto than you would expect. This BlackRock partnership is indicative of that. The cryptoeconomy has permeated traditional markets enough to persist past moments as volatile as these. And traditional markets, unlike three years ago, are not running away because crypto winter hit. There appears to be an understanding that cryptocurrency, much like every other asset, will eb and flow. To put it frankly, it’s the enemy they know now.

But this is a great achievement for cryptocurrencies. It means that institutional support is much more achievable for Web3 businesses, and disrupters in finance overall. This Blackrock partnership will be the lynchpin in a string of banks and investment firms endorsing and incorporating crypto into their portfolios.

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