BlackRock and Coinbase Companies Prepare Bitcoin Investment Products for Institutions

Asset management firm BlackRock partnered with crypto exchange Coinbase to prepare a Bitcoin (BTC) investment product for institutional investors.

Coinbase (COIN) shares jumped 15 percent to $92.61 following the announcement. This year, Coinbase shares have lost more than 67 percent in value.
Through this investment product, BlackRock customers can use the Aladdin investment management system to manage BTC and other portfolio assets such as stocks and bonds.

The system will also facilitate trading and financing through the Coinbase exchange. Blackrock explained, the product will focus on BTC.BlackRock's move underscores the involvement of Wall Street market players in the crypto sector despite the crypto market experiencing a sharp decline this year.

Bitcoin Investment Products from BlackRock Company

BTC has lost about 50 percent of value by 2022. The failure of the Terra ecosystem (LUNA) and the bankruptcy of hedge fund Three Arrows Capital led to increased regulatory scrutiny.Coinbase is facing scrutiny by the US Securities and Exchange Commission (SEC) for trading in digital assets that are not registered as securities.

BlackRock chose Coinbase as a partner due to the exchange's role in trading, custodial services, brokerage and reporting capabilities.Bloomberg reports that analyst Owen Lau of Oppenheimer & Co. said the regulatory risk associated with the BlackRock and Coinbase partnership is manageable because it only involves BTC that has a clear regulatory status compared to other digital assets.

Lau added, the partnership is a validation of the future of blockchain and digital assets. That is very positive for the crypto industry and for Coinbase.Joseph Chalom, BlackRock's head of strategic ecosystem partnerships, said, “Our institutional clients are increasingly interested in investing in the digital asset market. They want to manage digital assets efficiently.”

Institutional investors accounted for 75 percent of Coinbase's $309 billion trading volume in the first quarter of 2022. Coinbase's clients include hedge funds, corporations and asset managers.Brett Tejpaul, head of Coinbase Institutional, and Greg Tusar, vice president of institutional products, said the Coinbase and BlackRock and Aladdin partnership is a major achievement for the exchange.

Coinbase is committed to pushing the crypto industry forward and opening up new access points as institutional adoption of crypto accelerates.For BlackRock, the partnership is a step into the digital asset sector. CEO Larry Fink said he was studying the importance of digital assets and stablecoins and their benefits for customers.

BlackRock joins a group of investors at Circle Internet Financial, the issuer of USD Coin, with the intention of becoming the primary manager of the group's cash reserves.