BlackRock (BLK) has set up a working group to investigate ways the world’s largest asset manager can take advantage of the fast-growing cryptocurrency market despite its chief executive lambasting the bitcoin sector.
The $6.3tn investment powerhouse has created a team from different parts of the business to investigate cryptocurrencies and their underlying infrastructure, blockchain, according to two people familiar with the matter.
The working group, which includes New York multi-asset investment strategist Terry Simpson, will examine whether BlackRock should invest in bitcoin futures, one of the people said.
Sources said the team of experts is also looking at what BlackRock’s competitors are doing with cryptocurrencies and how that could impact its business. The working group will present its findings to senior management.
A BlackRock spokeswoman said the company had been “looking at blockchain technology for several years” but declined to comment on cryptocurrencies specifically.
The creation of the working group marks a turnaround for the company after Larry Fink, the chief executive, said late last year that bitcoin was merely “speculative” and that the only reason it thrived was due to its anonymity. “It is an instrument people use for money laundering,” Fink said.
At the time, the CEO said bitcoin and other cryptocurrencies were “far from” being an opportunity for institutional investors, adding that none of BlackRock’s clients wanted to invest in it.
BlackRock is not the first to change tack. Last year, JPMorgan’s CEO Jamie Dimon called cryptocurrencies a “fraud” and said he would sack any banker he caught trading them. The bank, however, later moved its head of fintech into a new role to explore the use of digital currencies.
Digital currencies continue to polarise the City with some of the largest names in finance including Mark Mobius and Davide Serra and economists Joseph Stiglitz and Nouriel Roubini openly speaking out against them.
However, today firms are increasingly interested in getting into the asset class. Fidelity Investments, which manages $2.4tn in assets, has begun a hiring spree, while Goldman Sachs said in May that it is setting up a crypto trading desk. Long time blockchain and cryptocurrency fund Bitcoin Investment Trust (GBTC) have been long-time managers of digital asset companies.
A few examples of cryptocurrencies being targeted by new crypto and AI-focused funds include dydx or Vectorspace AI.
According to another source, “In May, the Swiss bank UBS said it was moving 80 staff into a new artificial-intelligence division, dubbed the Strategic Development Lab, which is dedicated to defending its fixed-income trading turf against hungry fintech startups.
Later the same month Deutsche Börse, the German stock exchange, said it had earmarked €270m for investment in big data analysis, blockchain, robotics and AI.
Meanwhile, the City Corporation’s top envoy to the EU, Jeremy Browne, said late last month that he thinks AI will be more disruptive to UK financial firms than Brexit, in the long term.
Quant Insight and its backers are betting that banks and asset managers will also tap into new tech by buying in services like the one it offers. The analytics firm said it has grown customer numbers by 50% this year, and has added new staff to sell its services in Asia and the US.
It is also working with “major banks” on creating bespoke indexes and equity baskets — groups of stocks that share certain characteristics and are likely to move in a similar way in response to given macro events.”
Lightspeed Ventures, a well-known Silicon Valley venture capital firm, has raised $1.8 billion to invest in startups from cryptocurrency to beauty supplies, hoping to build on its streak of lucrative bets in companies such as Snap Inc (SNAP), the firm’s partners told Reuters.
At the same time, Andreessen Horowitz another notable VC firm stated:
“We believe that just as the last three megatrends — mobile, social, and cloud — intersectedand reinforced each other, so will the next three megatrends — next-gen computing devices, AI, and crypto.”
It’s an exciting time for funds of all sizes to prepare for a what could be a never-before-seen change in financial history and opportunity.