Libra Noise Cancellation: Tune Out The Poiticians, Libra Is Going To Happen

In spite of all the bluster, partners bailing, and constant congressional hearings, we’d put our money on Libra eventually being a things and Facebook getting what it wants – its own native payments system. Call it crypto, call it ‘paypal next’, call it whatever you want, but it is going to happen. It just might look, sound, and feel different than what the social media giant initially envisioned.

Via CoinTelegraph:

“Meanwhile, the furor over the controversial Libra has begun to take a more political undertone, both within and outside the United States. Arguments for and against the project now seem to include issues surrounding the trade war between the U.S. and China.”

“In Europe, China’s response to Facebook’s crypto project (the creation of yuan-pegged digital currency) and Libra itself, have sparked some commentators calling on the European Central Bank to adopt a digital currency for the EU. In some ways, it appears Libra has ignited a new currency war, one that might take place in the digital realm, with several counties floating their own central bank digital currencies (CBDCs).”

“For Libra, the regulatory hassle might constitute only part of its trouble, as the project could face stiff competition from payment giants, especially in China and other parts of Asia. Some of these payment companies are already identifying Libra as a potential competitor ahead of its launch.”

Whether it executes specifically on its initial mission, or some ‘frankenstein’ version of Libra emerges after checking itself out of the regulatory hospital – you can still bet that the powers that be at Facebook will eventually prevail. Libra will happen.

Instagram, WhatsApp, Oculus, and a number of other acquisitions (don’t forget the dummies at Snap that should’ve sold to FB); Zuckerberg always gets what he wants.

Bakkt Update: Consumer App Is Coming, Starbucks Partnership Takes Shape

The intrigue around Bakkt and the scale of their operations continues to take shape. Not only are all of the ‘levers’ in place; given that their parent company and full scale architectrue backed by ICE and its myriad commodities platforms – but the Starbucks partnership has always held significant intrigue. Today’s Medium post begins to shed some light on what that will look like.

“While users are exposed to digital assets including bitcoin, cashbacks and rewards, Bakkt highlighted their efforts in supporting “a superset of digital assets, including cryptocurrencies as seamlessly as investors transact in stocks in a retail brokerage account.” Moreover, the company also shared its vision is to provide a consumer platform for managing a digital asset portfolio, “whether they wish to store, transact, trade or transfer their assets.”

“Based on his past experiences, Mike Blandina, Bakkt’s Chief Product Officer mentioned, that by driving more integration and efficiency across digital wallets, transaction processing and payment acceptance, “there are meaningful opportunities for merchants and consumers to seamlessly interact using digital assets in ways that have not been previously considered.” To sum up Bakkt’s efforts, Blandina said that Bakkt’s focus will be on four key areas: digital asset infrastructure, marketplace access, maximizing control and establishing trust.”

Starbucks remains the largest app based payments ecosystem in the United States – boasting better than 27M users – larger than Apple pay, Samsung Pay, or Google Pay. Bakkt hitching its consumer facing strategy to Starbucks is as good a decision as we’ve seen in the crypto space; remarkable even. 

The relative ‘efficacy’ of the partnership is yet to be seen, and it should be said that the partnership with Microsoft focused on things like encryption and user funds safety may ultimately be the bigger deal. Still, the branding cache’ and headlines play really, really well.

You’d do well to never bet against Sprecher and his squad, They have a long history of winning in the financial markets. So far, even with the delays, Bakkt remains in an enviable position.

CME Bitcoin Futures Expand: Further Proof That Institutions Are Starting To ‘Get It’

When the needle begins to move it may be to late for the huddled masses to benefit from reasonable Bitcoin price levels. Global banking institutions continue to push real capital into Bitcoin and the flagship futures contracts at the CME have made that clear.

CME launched its Bitcoin futures contracts in December 2017 and since then it has attracted a ton of institutional interest towards the Bitcoin derivatives market. Each CME contract consists of 5 BTC which is settled at the end of each month. The Bitcoin futures volume on CME is also a great indication of market sentiment as investors usually go short in a bear market and start hedging long in the bull market.

Despite the price tussle in the last month, institutional investors have started to go bullish on Bitcoin again, as evident from the increasing number of investors going long on CME’s Bitcoin Futures market. Several crypto analytical firms have recently revealed that the number of investors going long on Bitcoin has started to rise again, after falling to almost zero. Currently, the long-holdings on CME have just gone above 1,100.

No longer is Bitcoin viewed as just a cypherpunk movement via’ neckbeards’ and anarchists. Those days are long gone – and have been replaced by commitments from Fidelity, CME, Bakkt (of the Intercontinental Exchange family), Microsoft and other corporate behemoths. In other words, CME volumes are just starting to catch up to the underlying architecture and dialogue. Long term, it seems higher BTC prices are ahead.

INSIDER: CFTC AND ETHEREUM: As The CFTC Requests Ethereum Comments, Insider Considers Commodity Designation A ‘Done Deal’

Previously the CFTC formally requested ‘public comment’ concerning whether or not Ethereum should be designated as a commodity or not (the ‘not’ would then throw it into the security designation and open up a whole mess of issues). Obviously, Ethereum and every coin/dapp that has been built on it has a vested interest in a commodity designation by the CFTC.

Here is the body of the request by the CFTC:

The Commodity Futures Trading Commission (“Commission” or “CFTC”) in furtherance of the LabCFTC initiative is seeking public comment and feedback on this Request for Input (“RFI”) in order to better inform the Commission’s understanding of the technology, mechanics, and markets for virtual currencies beyond Bitcoin, namely here Ether and its use on the Ethereum Network. The Commodity Exchange Act (“CEA”) grants the Commission regulatory authority over the commodity futures markets. The Commission is seeking public feedback in furtherance of oversight of these markets and regulatory policy development. The input from this request will advance the CFTC’s mission of ensuring the integrity of the derivatives markets as well as monitoring and reducing systemic risk by enhancing legal certainty in the markets. The RFI seeks to understand similarities and distinctions between certain virtual currencies, including here Ether and Bitcoin, as well as Ether-specific opportunities, challenges, and risks. The Commission welcomes all public comments on these and related issues.

Many have made the case that Ethereum is significantly more ‘centralized’ than Bitcoin and thus have serious questions about its commodity-type traits. Others believe that the breadth of the ERC-20 (at a minimum) ecosystem makes the case for its decentralization – thus making it a clear commodity.

Whatever the arguments are either way we believe, based on one conversation with a staffer at the CFTC, that the request for comment is a mere formality. Internally the decision to designate Ethereum as a commodity is all but made.

**We have two separate and reliable sources connected to the CFTC. One was willing to give us an anonymous comment, the other spoke with us but asked that the comments be left out of this article.

As per the thinking at the CFTC:

“The request for comment is seen as a reasonable procedural process to check the box before announcing the commodity designation. Chris understands the digital assets landscape really, really well and knows that there is less consensus on this than there was for Bitcoin. This step will give some background to the decision and he expects the comments to be largely in favor of a commodity designation.”

Any policy decision in the crypto space will have long-lasting and even unintended consequences. It makes sense to consider every angle and every reasonable outcome of a commodity designation for Ethereum. Several institutions are counting on the decision going in that direction.

ErisX, Bakkt, Fidelity, ETrade, TD Ameriprise, and others have plans to list/trade Ethereum based on its eventual designation as a commodity. ErisX has already announced its intentions, Bakkt initially listed Ethereum as one of its two launch tokens before they decided to wait for the formal word from the CFTC, and Goldman Sachs is preparing to offer an Ethereum based product for its upper-crust clients.

The ripple effects of this decision will resonate throughout 2019 and give context to every other token that claims to be a commodity/utility and not a security.

The CFTC and Chris Giancarlo are playing it smart.

JP MORGAN COIN: Privacy Is Paramount; Bank Aims To Hide Transaction Details

JP Morgan seems to be listening to some of the serious discussions within the crypto community. Specifically, the issue of privacy. And while most wouldn’t associate the largest bank in the world with the idea of privacy they seem to be taking notes as to what matters most to the movement: privacy.

**before we go further let’s make one thing clear – we do. Or believe that JPM will actually build a token that finds itself outside of the reach of US and global regulators. So ‘privacy’ in this context is limited.

As per a CoinDesk post moments ago: “Revealed exclusively to CoinDesk, JPMorgan has built an extension to the Zether protocol, a fully decentralized, cryptographic protocol for confidential payments, compatible with ethereum and other smart contract platforms and designed to add a further layer of anonymity to transactions. The New York-based financial institution will open-source the extension Tuesday, and is likely to use it with Quorum, the bank’s homegrown, private version of ethereum.”

“Zether, which was built by a group of academics and financial technology researchers including Dan Boneh from Stanford University, uses zero-knowledge proofs (ZKPs), a branch of mathematics which allows one party to prove knowledge of some secret value or information without conveying any detail about that secret.”

So privacy, in this case, means the ability to conceal the transaction addresses and the amounts that are being sent and received. This is about as far as a heavily regulated organization like JP Morgan could ever get away with, and even this is probably pushing the limits.

Still, from 50,000 feet, this is an effort that pushes the crypto narrative along in earnest. JPM using crypto industry products to open source their entry into the space adds a significant level of validation – even if some in crypto aren’t interested in this type of validation.

It will be interesting to eventually see what JPM unveils and how it is used in both the institutional and retail space.

MORGAN STANLEY COPYCAT: FOLLOW FIDELITY: Morgan Stanley Is Watching Fidelity’s Digital Assets Initiative Closely, Planning Similar Offering

Morgan Stanley has seemingly been planning some sort of crypto initiative for longer than their clients can wait. According to sources at the global investment bank, clients (institutional and UHNW retail) have grown impatient with Morgan Stanley and ‘talk’ of crypto accessibility.

The sources discussed a small percentage of the client base keeps asking the firms bankers and brokers why they aren’t out in front in regards to crypto. Specifically, a straight line is being made by some as to Goldman Sach’s (it is well known in traditional finance that Morgan Stanley and Goldman Sachs are bitter rivals) consistent investments in the crypto ecosystem, BitGo and Circle, to name just a couple.

Those Goldman Sachs led investments position the firm to quickly scale up once the regulatory landscape is clear and defined. Morgan Stanley hasn’t made those any ‘in-kind’ investments that match Goldman’s and clients and brokers have been grumbling about it.

But there may be some hopes according to two sources that we spoke to at the bank. Morgan Stanley leadership is enamored with the path that Fidelity is taking and believe they can take the same path – and fashion it to be of interest to the firms largest institutional and UHNW clients.

“Are we behind? Yes. That really can’t be disputed at this point.” said our first source near the top of the communications org chart at Morgan Stanley. “But that won’t be the case once we commit to a particular strategy. We believe we are well positioned when the time is right.”

A second source closer to the broker ranks had this to say, “The word we hear is that leadership finds the Fidelity model for crypto appealing. And that could be the way it goes down here. Whatever strategy they choose, it needs to come quickly. We are getting asked about it daily. It does seem like clients that are aware of Bitcoin in particular see it as digital gold. That phrase has popped up often with UHNW clients.”

The digital gold narrative from uber-wealthy individuals and families is interesting. It means, if nothing else, that for those looking for Bitcoin information, the digital gold narrative is resonating.

“Clients that ask about crypto seem to be aware of Bakkt as well and question us as to our involvement and accessibility within their framework”, our second source described. “It is revealing what messaging seems to be making its way into these clients hands and sticking. Bakkt and digital gold seem to be moving in lock step – expect our firm (Morgan Stanley) to play along and once involved market it ($BTC) as such.”

Interesting conversations yesterday that reveal how traditional market players and dealing with the growth of Bitcoin and crypto at large. The bigger picture, that these firms have finally embraced, is that Bitcoin isn’t going away. And they are hell-bent on being there when mass investment follows an increase in awareness and adoption.

BAKKT BAND: Executive Roll Grows; “Doubting this team would be foolish…”

Just yesterday Bakkt announced another high level executive that comes to the project with an impressive resume’ and credentials that can’t be assailed. After speaking with several sources (disclosure: these sources have an equity position in Bakkt), it is clear that many, if not most, believe Bakkt is a nearly ‘fail-proof’ venture.

Just look at the executives, investors, announced partners – and the numbers really begin to add up. Venture capital scions and other well capitalized names that have taken a stake in Bakkt view the firm and its growing staff as the ‘gold standard’ and unmatched in the crypto space. We understand why.

Executives that include Kelly Loeffler, Adam White, and now Mike Blandina formerly of PayPal and Google. A board consisting of Tom Noonan, Jeff Sprecher, Sean Collins, and Akshay Naheta. Investors that include Mike Novogratz at Galaxy Digital, Fortress Capital, Pantera Capital, Boston Consulting Group, Eagle Seven, M12 (Microsoft’s venture capital arm), Goldfinch Partners, and several others.

A literal who’s who of Fintech venture capital and superstar execs with their sights set squarely on leading crypto to the promised land of adoption and usage for the masses.

One source who’s invested in the firm said the following, “You can never guarantee a win in venture capital or any such endeavor; but the risk/reward profile is seriously tipped in our favor as stakeholders. The team is as good as it gets, the tech has been in place for the better part of a decade (ICE), and planning for this moment has been going on for nearly four years. Our thesis, doubting this team would be foolish, so we remain very comfortable with our investment.”

Microsoft, Starbucks, and a bevy of executives and investors with lengthy and proven histories in building brands, mass marketing, work flow, leadership and good ole’ fashioned winning.

As a business it is a recipe for phenomenal success. As a marketing entity, and how it relates to crypto at large, Bakkt is on a mission to make spending and trading crypto as ubiquitous as credit cards and online brokerage houses.

Expect a marketing blitz that is smart and ever expanding. Bakkt is certainly planning on it being a large part of its eventual (inevitable) success.

REPORT: NEW YORK CRYPTO REGULATIONS: NY BitLicense Is An Abomination; May Only Get Worse

New York, one of the first states to adopt virtual currency rules, has taken a relatively strict approach in the regulation of virtual currency activities.1 The rules, enacted on 24 June 2015, established a regulatory framework for virtual currency businesses that requires operations related to transactions involving any form of virtual currency to obtain a “Bitlicense” from the state.2

The strict licensing requirements favor large virtual currency firms and financial institutions. The BitLicense application and licensing process are likely overly burdensome for small companies with limited access to capital and legal resources.

Overview of Bitlicense

Subject to certain exceptions, anyone engaging in any of the following activities is required to obtain a BitLicense from the New York State Department of Financial Services (“NYSDFS”):

  • Virtual currency transmission
  • Storing, holding, or maintaining custody or control of virtual currency on behalf of others
  • Buying and selling virtual currency as a customer business
  • Performing exchange services as a customer business
  • Controlling, administering, or issuing a virtual currency.3

Out-of-state businesses that engage in virtual currency activity involving New York State, or with persons within the state, must obtain a BitLicense to conduct their business.4

Some of the regulatory requirements include:

  • Minimum capital reserves
  • Records of transactions must be kept for at least seven years
  • Quarterly financial statements must be submitted within 45 days of the close of a quarter
  • Background checks on all employees must be performed by an independent investigatory agency
  • Appointment of a dedicated compliance officer
  • Enforcement of written anti-fraud, anti-money laundering, cybersecurity, privacy, and information security procedures
  • Prior written approval from the superintendent of the NYSDFS before the company introduces a “material change” to their business models, such as a new product or service
  • Prior written approval from the superintendent of the NYSDFS before any merger with or acquisition of any company holding a BitLicense5

The application fee for a Bitlicense is $5000 and the applicant must complete a 31-page application form.6

The “one-size-fits-all” licensing process does not provide any exceptions for small virtual currency companies.

Application Approval Process Slow, but Improving

The 2015 rules do not impose a deadline on the NYSDFS for completing the licensing process.7

Since the enactment of the rules, the NYSDFS has approved only eleven charters or licenses for virtual currency companies.8

The license for Genesis Global Trading was not granted for nearly three years, and a license for BitFlyer USA, Inc. was not granted for over a year.9

The number of licenses issued will likely increase over the next 12-24 months.

Focus Remains on Consumer Protection: The 2018 New York Attorney General Report

In September, the New York Attorney General (“NYAG”) issued a report that concluded crypto trading platforms vary significantly in their risk management strategies and in the ways they fulfill customer responsibilities.10

The NYAG identified three broad areas of concern: potential conflicts of interest; lack of serious efforts to impede abusive trading activity; and limited protections for customer funds.11

The NYAG also referred three virtual currency exchanges- Kraken, Binance, and Gate.io-to the state’s financial regulator for possible legal action and raised concerns over price manipulation and conflicts of interest on trading platforms.12

The report concludes that “virtual asset trading platforms have yet to implement serious efforts to monitor and stop abusive or manipulative trading.”13

Draft Virtual Currency Legislation Introduced into the State Assembly

Virtual currency bills have been introduced in the State Assembly this year. New York, however, will not likely amend existing rules or introduce major virtual currency legislation until 2020, after the State Assembly is able to review a task force report that must be completed by December 2019.

  • Bill on the Creation of Virtual Currency Task Force: The bill proposes the creation of a digital currency task force to provide the governor and the legislature with information on the potential effects of the widespread implementation of digital currencies on financial markets in the state. If passed, the bill would establish a group consisting of nine members which would be called on to submit a report to the governor, temporary president of the Senate, and the speaker of the assembly by December of 2019. Additionally, the task force would be required to provide the number of digital currencies and exchanges operating in the state, information about large investors in the field, and the energy consumption necessary for coin mining operations. The task force would also provide a review of laws and regulations on digital currency used by other states, the federal government, foreign countries, and foreign political and economic unions to regulate the marketplace.14
  • strong>Bill on Virtual Currency: The bill proposes eliminating the BitLicense and licensing fees. In addition, the bill mandates that any virtual currency business or entity be subject to routine audits by a public or third-party depository service. Any entity in full compliance will receive a digital New York Seal of Approval to reassure consumers that the outlet is trustworthy and secure.15

Recommendation: We would advise new crypto firms to consider establishing operations in Montana, New Hampshire, Texas, Tennessee or Wyoming.

The information provided in this report is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney, financial advisor, or other professional to determine what may be best for your individual needs.


This report was prepared by Trifin Roule.

For nearly two decades, Mr. Roule provided for the U.S. government legal analysis of anti-money laundering, counterproliferation financing and counterterrorist financing laws and regulations dozens of jurisdictions, and international standards, as detailed through intergovernmental bodies (e.g. Financial Action Task Force (FATF)), and financial institutions (e.g. banks’ financial intelligence units and compliance offices).

In addition, Mr. Roule has provided in-depth analysis of digital asset accounting, auditing, customer due diligence, exchange, licensing, mining, initial coin offering (ICO), private key storage, and record-keeping practices and regulations.

Mr. Roule is a former Assistant Editor at the Journal of Money Laundering Control, a peer-reviewed journal that provides detailed analysis and insight on the latest issues in the law, regulation and control of money laundering and related matters. Mr. Roule has published dozens of articles on anti-money laundering, and counterterrorist financing laws and regulations.

Trifin Roule is the Publisher of our new division, Abacus Legal, and his and his team’s reports will be free to read for the next 45 days. After that time they will be dubbed premium content and require a subscription.


  1. “New York State Department of Financial Services, New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200. Virtual Currencies”.
  2. In accordance with the New York State Administrative Procedure Act (SAPA), the final DFS rules for virtual currency business activity have been published in the New York State Register’s June 24, 2015 edition.
  3. New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200: Virtual Currencies, §200.2(q).
  4. New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200: Virtual Currencies, §200.2(q).
  5. New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200: Virtual Currencies, §§200.4, 200.7.-200.19.
  6. New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200: Virtual Currencies, §200.5; and “Application Forms For: License to Engage in Virtual Currency Business Activity,” New York Department of Financial Services at URL: https://www.dfs.ny.gov/legal/regulations/vc_license_application.pdf.
  7. New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200: Virtual Currencies, §200.3.
  8. “DFS Authorizes Coinbase Global, Inc. to Form Coinbase Custody Trust Company LLC,” New York Department of Financial Services Press Release at URL: https://www.dfs.ny.gov/about/press/pr1810231.htm.
  9. “The Ledger: Is New York’s BitLicense an ‘Absolute Failure?” Fortune, 25 May 2018.
  10. “Virtual Markets Integrity Report – New York State Attorney General,” Office of the New York State Attorney General, 18 September 2018, p. 1.
  11. “Virtual Markets Integrity Report – New York State Attorney General,” Office of the New York State Attorney General, 18 September 2018, pp. 5-6.
  12. “Virtual Markets Integrity Report – New York State Attorney General,” Office of the New York State Attorney General, 18 September 2018, p. 2.
  13. “Virtual Markets Integrity Report – New York State Attorney General,” Office of the New York State Attorney General, 18 September 2018, p. 5.
  14. Bill No. S09013: Creates the digital currency task force to provide the governor and the legislature with information on the potential effects of the widespread implementation of digital currencies on financial markets in the state, New York State Assembly website at URL: https://nyassembly.gov/leg/?bn=S09013&term=2017.
  15. Bill No. A09899: Relates to financial technology products and services; establishes a regulatory sandbox program, New York State Assembly website at URL: https://nyassembly.gov/leg/?default_fld=%250D%250A&leg_video=&bn=A9899&term=2017&Summary=Y&Actions=Y&Committee%2526nbspVotes=Y&Floor%2526nbspVotes=Y&Text=Y.

SEC GUIDANCE: SECURITY OR NO? Framework for ‘Investment Contract’ Analysis of Digital Assets”

The US Securities and Exchange Commission just issued a critically important document. It is the first to take significant steps to potentially define what tokens are a security and which are not. There is much to unpack here, but we’ve added the letter in its entirety below.

Based on an initial read it looks like there is a lot of ‘if, and’s and but’s’ to make sense of – but still, an initial framework. Legal analysts in the blockchain and token space will unpack this over the course of the day.

Read the full text below:

“Blockchain and distributed ledger technology can catalyze a wide range of innovation.  We have seen these technologies used to create financial instruments, sometimes in the form of tokens or coins that can provide investment opportunities like those offered through more traditional forms of securities.  Depending on the nature of the digital asset, including what rights it purports to convey and how it is offered and sold, it may fall within the definition of a security under the U.S. federal securities laws.”

“As part of a continuing effort to assist those seeking to comply with the U.S. federal securities laws, FinHub is publishing a framework for analyzing whether a digital asset is offered and sold as an investment contract, and, therefore, is a security.The framework is not intended to be an exhaustive overview of the law, but rather, an analytical tool to help market participants assess whether the federal securities laws apply to the offer, sale, or resale of a particular digital asset.  Also, the Division of Corporation Finance is issuing a response to a no-action request, indicating that the Division will not recommend enforcement action to the Commission if the digital asset described in the request is offered or sold without registration under the U.S. federal securities laws.”  

“As financial technologies, methods of capital formation, and market structures continue to evolve, market participants should be aware that they may be conducting activities that fall within our jurisdiction.  For example, market participants may engage in activities that require registration of transactions and persons or entities involved in those transactions.  Even if no registration is required, activities involving digital assets that are securities may still be subject to the Commission’s regulation and oversight.  More specifically, the information contained in this framework may apply to entities conducting the following activities related to digital assets:

  • offering, selling, or distributing
  • marketing or promoting
  • buying, selling, or trading
  • facilitating exchanges
  • holding or storing
  • offering financial services such as management or advice
  • other professional services

“This framework represents Staff views and is not a rule, regulation, or statement of the Commission.  The Commission has neither approved nor disapproved its content.  This framework, like other Staff guidance, is not binding on the Divisions or the Commission.  It does not constitute legal advice, for which you should consult with your own attorney.  It does not modify or replace any existing applicable laws, regulations, or rules.  Market participants are encouraged to review all the materials published on FinHub.”

“The Staff recognizes that determining whether a new type of financial instrument, including a digital asset, is a security can require a careful analysis of the nature of the instrument and how it is offered and sold.  If after applying the framework, market participants have questions regarding whether a particular digital asset is a security, they are encouraged to reach out to the Staff through FinHub’s webform.”

Developing…


BLACKROCK, BITCOIN, BAKKT: BlackRock Adds To Digital Assets Team, Pivots To Alternative Assets In Large Scale Restructuring

BlackRock has been quietly building and advising across the digital asset spectrum. As the largest asset manager in the world, to the tune of $6T, they’ve built an internal digital asset team, published several crypto asset white papers, and have been closely advising Coinbase (and other crypto exchanges) for better than 18 months. When the term ‘institutional’ is used in the crypto ecosystem you could simply use the BlackRock logo in its place. They define the term in finance.

Take a look at the latest additions to the BlackRock movement in digital assets via Forbes:

“On Tuesday, BlackRock, the largest asset manager in the world with $6 trillion under management, said it would undergo a massive management overhaul, in part reorganizing to focus on alternative investments. And while BlackRock declines to comment on any plans for large forays into crypto assets, it recently hired former Ripple product marketer Robbie Mitchnick to its Digital Wealth team, which uses the firm’s successful Aladdin global asset management software to build institutional portfolios. Last summer, Mitchnick and Stanford Business School professor Susan Athey published a paper called “A Fundamental Valuation Framework for Cryptoassets,” which essentially laid out a sophisticated model for valuing cryptocurrencies bitcoin and XRP.”

These are some of the first public markers as to BlackRock’s serious interest and work with respect to Bitcoin and other crypto assets. And from what we are hearing, they’ve taken a unique interest in Bakkt’s pending launch and operations as well.

Once Bakkt launches they are considering a Series B round of funding and BlackRock has a legitimate interest in taking a piece of that round. Not that this is a surprise, but BlackRock is known for eschewing founding or Series A rounds and generally prefer later rounds that have evolved via the ‘proof of concept’ of any business.

That also assumes that any digital asset participation for institutional clients would include using Bakkt’s infrastructure to clear trades. While we’ve yet to get any solid confirmation on that, it does pass the sniff test.

Whatever BlackRock’s intentions are with respect to digital assets, the fact that they are formulating some level of involvement is extraordinary and only adds to the ‘institutional fomo’ narrative.

As always, with respect to firms like BlackRock and global investment banks, watch what they do, not what they say. Very, very interesting.