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  • J Huang and S Pettigrove

Wall St giants lay crypto bets

Updated: Jun 23, 2023

Despite crypto winter, institutional interest in digital assets has remained strong with several big names in traditional finance (TradFi) announcing digital assets projects in the last few weeks.

BlackRock, the world's largest asset manager, filed paperwork with the U.S. Securities and Exchange Commission (SEC) last week to register a spot Bitcoin ETF. Called iShares Bitcoin Trust, the ETF aims to be the first ETF with the cryptocurrency itself as the underlying asset, rather than futures contracts.

The ETF filing marks the latest foray by BlackRock into crypto after launching a spot Bitcoin private trust for institutional clients in the U.S. last year and striking a partnership with Coinbase to allow institutional access to crypto trading. The firm's CEO, Larry Fink, has also strongly advocated the benefits of asset tokenisation as the future of financial markets.

The latest announcement sent the Bitcoin price to a six-week high. Blackrock's filing was quickly followed by WisdomTree, Valkyrie, Bitwise and Invesco filing or, in some cases re-filing, to launch their own spot Bitcoin ETFs.

Todd Rosenbluth, head of research at VettaFi, was quoted by the Wall Street Journal:

As the overall ETF industry leader, a BlackRock spot bitcoin ETF could gather significant assets quickly, even if just a small percentage of cryptocurrency assets went into it

The timing of BlackRock's filing may be strategic with Grayscale Bitcoin Trust, the crypto asset manager which operates the largest bitcoin private trust, currently suing the SEC, arguing that it should be able to convert its trust into a spot bitcoin ETF. Grayscale has said it expects a verdict in autumn, though a ruling could come sooner. If Grayscale wins, BlackRock's filing could facilitate a fast launch of its ETF. BlackRock has nevertheless included additional market surveillance measures in its filing which are intended to address the SEC's concerns regarding price manipulation in spot Bitcoin markets.

Other prominent names in TradFi such as Standard Chartered, Nomura and Charles Schwab are either creating or backing new crypto companies, including exchanges and custody groups that can handle cryptocurrencies such as Bitcoin and Ether. On 20 June, EDX Markets, a cryptocurrency exchange backed by Citadel Securities, Fidelity Investments and Charles Schwab officially launched its platform.

Meanwhile, BNY Mellon and Fidelity are launching crypto custody arms. And just this week, Deutsche Bank announced that it had filed with Bafin in Germany to become a crypto custodian.

In launching their own crypto asset trading platforms and apps, these TradFi institutions hope that institutional investors will prefer their familiar brands to native cryptocurrency exchanges.

In a post-FTX crypto industry, it is interesting to see the biggest names in TradFi and Wall Street doubling down on crypto and digital assets. The latest moves also come at a time when crypto natives such as Coinbase and Binance are fighting regulatory actions by the SEC which has been pursuing a broad policy of regulation by enforcement against the crypto industry.


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