What Are BlackRock’s Crypto Plans? | Robbie Mitchnick Head Digital Assets at Blackrock

That’s right, Bankless Nation, BlackRock on the podcast today. BlackRock is the world’s largest asset manager, a company that manages over $10 trillion dollars in assets around the world, to put it in perspective, that’s 5 times the crypto market cap. Let’s just say what they do has ripple effects in global markets. But here at Bankless we wanted to figure out what they’re doing in crypto. That’s why we brought Robbie Mitchnick, BlackRock’s Head of Digital Assets. We explore Crypto narratives in TradFi, how they measure the risk profile of Crypto, their plans for the future of ETFs, Tokenization and even DeFi. ------ 📣 SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🦄UNISWAP | BROWSER EXTENSION https://bankless.cc/uniswap ⚖️ ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🗣️TOKU | CRYPTO EMPLOYMENT https://bankless.cc/toku ------ ✨ Mint the episode on Zora ✨ https://zora.co/collect/zora:0x0c294913a7596b427add7dcbd6d7bbfc7338d53f/63?referrer=0x077Fe9e96Aa9b20Bd36F1C6290f54F8717C5674E ------ TIMESTAMPS 0:00 Intro 5:36 What is BlackRock? 7:33 BlackRock’s Crypto Arc 14:42 Digital Assets Team 17:01 BlackRock Bitcoin ETF 20:33 Investor Education 22:48 Narratives 24:58 Risk Management 34:04 Regulatory Environment 38:27 The Future of ETFs 42:30 Tokenization 51:00 What Needs to be Built 54:26 The State of DeFi 57:03 BlackRock’s Crypto Mission 1:00:44 Closing & Disclaimers ------ RESOURCES Robbie https://x.com/robbiemitchnick Blackrock https://x.com/BlackRock ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures ⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  The properties that you can build into a system that is tokenized versus our legacy system are immense, right? When you think about liquidity, real time, instantaneous, riskless settlement, 24/7 trading, the fact that these assets become digitally native, transparent, interoperable, that we can remove a lot of the layers of intermediaries that had to exist in the current system, right? All these things create massive opportunities for efficiency, for financial inclusion, for access to a wider array of investments in a more efficient way. So that's what gets us excited.

• 0:41Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help BlackRock become more bankless. That's right, folks. BlackRock on the podcast today, the question is, are they going bankless? What are they up to in crypto? BlackRock is, as you know, the world's largest asset manager, and they've entered crypto in a pretty big way this year with both the Bitcoin ETF, which is a massive success, and also the Ethereum ETF. Now, this is a company that manages over 10 trillion in assets. It's absolutely massive. So what they do has ripple effects in the broader global economy. So the question David and I posed to Robbie Mitchnick, who is the head of digital assets

• 1:24Ryan Sean Adams?

  at BlackRock, is, what are you here to do? What are your intentions for the space?

• 1:28David Hoffman?

  I think listeners will be maybe surprised that it was not the Bitcoin ETF that was BlackRock's first foray into crypto. Actually, BlackRock has been interested in blockchain technology for almost a decade now, seven years, eight years, and they have just more recently accelerated what they are doing in crypto with the BlackRock Digital Assets Team. I think that was kind of the thing that I was most interested in seeing about is like, what are the ambitions of this like kind of small SEAL Team Six digital asset team inside of BlackRock? Like, what are they? They've done the ETFs, they've done one tokenized project. What are they up to next? And now that BlackRock is our friendly neighbor, we Want to take the opportunity to kind of peek over the fence and see what they're doing over there.

• 2:13David Hoffman?

  See how friendly they are. Yeah, see how friendly they are. Yeah, I like that. Now we gotta live together.

• 2:17Ryan Sean Adams?

  I would say one thing about this episode is they are experts at pitching to institutional investors, right? And Robbie even had some insights into like how to better position and talk about crypto to institutions that I think listeners will want to tune in for. All right, guys, let's get right to the episode. But before we do, we want to thank the sponsors that made this possible, including our recommended place to go purchase your Bitcoin and Ether and other crypto assets. That is Kraken. If you don't have an account already, go create an account now.

• 2:47David Hoffman?

  If you want a crypto trading experience backed by world-class security and award-winning support teams, then head over to Kraken, one of the longest-standing and most secure crypto platforms in the world. Kraken is on a journey to build a more accessible, inclusive, and fair financial system, making it simple and secure for everyone, everywhere, to trade crypto. Kraken's intuitive trading tools are designed to grow with you, empowering you to make your first or your hundredth trade in just a few clicks. And there's an award-winning client support team available 24/7 to help you along the way, along with a whole range of educational guides, articles, and videos. With products and features like Kraken Pro and Kraken NFT Marketplace and a seamless app to bring it all together, it's really the perfect place to get your complete crypto experience. So check out the simple, secure, and powerful way for everyone to trade crypto,

• 3:31David Hoffman?

  whether you're a complete beginner or a seasoned pro. Go to kraken.com/banklist to see what crypto can be. Not investment advice. Crypto trading involves risk of loss. The Uniswap extension is here. The self-custody wallet, created by the most trusted team in DeFi, Uniswap Labs, designed to make swapping feel effortless. This extension lives in your browser's sidebar, letting you swap, sign transactions, and send or receive crypto without ever losing your place on the internet. Plus, with human-readable transaction messages, you'll always know exactly what you're signing. Navigate a multi-chain world effortlessly with support for 11 chains like Ethereum Mainnet, Base, Arbitrum, and Optimism. No more chain switching or token importing. All your assets are right where you need them to be. The Uniswap extension is designed to level up your swapping experience with other Uniswap Labs products as well.

• 4:15David Hoffman?

  Easily onboard to the extension using the Uniswap Mobile Wallet to begin managing your assets across platforms. And take advantage of smooth seamless synergies with Uniswap Web App. So go and download the Uniswap extension today by clicking the link in the show notes. Just another way Uniswap is helping you swap smarter. Arbitrum is the leading Ethereum scaling solution that is home to hundreds of decentralized applications. Arbitrum's technology allows you to interact with Ethereum at scale with low fees and faster transactions. Arbitrum has the leading DeFi ecosystem, strong infrastructure options, flourishing NFTs, and is quickly becoming the web three gaming hub. Explore the ecosystem at portal.arbitrum.io. Are you looking to permissionlessly launch your own Arbitrum Orbit chain? Arbitrum Orbit allows anyone to utilize Arbitrum's secure scaling technology to build

• 4:59David Hoffman?

  your own orbit chain, giving you access to interoperable, customizable permissions with dedicated throughput. Whether you're a developer, an enterprise, or a user, Arbitrum Orbit lets you take your project to new heights. All of these technologies leverage the security and decentralization of Ethereum. Experience web three development the way it was always meant to be. Secure, fast, cheap, and friction free. Visit arbitrum.io and get your journey started in one of the largest Ethereum communities.

• 5:24Ryan Sean Adams?

  Bankless Nation, here's a day I never thought would come. We have BlackRock on the Bankless Podcast. We have Robbie Mitchnick here. He is the Head of Digital Assets at BlackRock. Robbie, welcome to Bankless.

• 5:34Speaker 00

  Thank you. Thanks for having me on.

• 5:36Ryan Sean Adams?

  Okay, Robbie, as you know, we have a very crypto native audience and they know what BlackRock is. They've heard of the organization, but they may not know exactly what it does. So in your words, what is BlackRock? What do you guys do over there?

• 5:49Speaker 00

  Sure. Well, BlackRock is an asset management firm primarily. We manage investments for clients all over the world in a multitude of asset classes. And to our clients are, you know, many of the largest institutions in the world. Think pension funds, insurers, sovereign wealth funds, endowments, as well as end investors directly. And we also are a provider of financial technology, primarily through our Aladdin platform, which you can think of as an end-to-end technology solution for managing the investment

• 6:29Speaker 00

  process that we deliver for some of the largest buy-side investors in the world.

• 6:36Ryan Sean Adams?

  And how big is BlackRock in terms of scale? I mean, like one measures maybe assets under management. Is that sort of a, you know, like a way to describe how large BlackRock actually is? Like, what are the other metrics that come to mind?

• 6:48Speaker 00

  Sure. Well, we are a global company, obviously headquartered in the US in New York. But one way to think about size and scale is that we manage roughly 10 trillion for our clients around the world. But it's important to remember that's money that we manage on behalf of clients. Those aren't BlackRock's assets. BlackRock doesn't own those assets. Ultimately, those are managed for the benefit of our various clients.

• 7:15Ryan Sean Adams?

  That's still big, though. I mean, your size is size. It's about five crypto worths of assets over at BlackRock.

• 7:21Speaker 00

  Yeah, you could look at it that way, I guess.

• 7:24Ryan Sean Adams?

  So Robbie, how did you guys find yourself in digital assets in crypto? Like, what's the full story? Because it seemed, I think, to a lot of folks in the crypto industry that just like suddenly BlackRock was here and it caught us by surprise a little bit. But I'm sure internally it's been kind of an evolution. So what's the full history here?

• 7:44Speaker 00

  Yeah, well, it's been a many-year journey, even though, you know, maybe the headlines are more concentrated to to the recent couple of years. I think the firm's exploration kind of began in 2016. That predates my time here. I think initially there was a view that the technology and asset class was not quite ready for primetime for our largest clients, for our usage at that point in sort of 2016 timeframe. I joined in 2018. I was the first fully dedicated employee to the space. It was a very kind of wide-open mandate to figure out what we could do with this exciting new technology

• 8:29Speaker 00

  and this new asset class. The early years, though, were focused much more on kind of blockchain innovation and applications. That was certainly where there was more comfort. So we explored. All manner of use cases across kind of our financial ecosystem built a lot of learning and know-how around the space, built some comfort as a firm. And ultimately, that paved the way for some of the evolution that was to come. And that evolution into the presence that we now have, which we think of the digital asset space broadly as crypto, stable coins and tokenization. But that evolution really, I would say, started to accelerate in kind of a 21, 22 timeframe.

• 9:14Speaker 00

  And there were three big things that drove that. One is that the state of infrastructure around this ecosystem started to mature meaningfully as a result of all the human and financial capital that had flown into the space and it started to institutionalize. Second was that there was, I would say, a growing recognition from a regulatory and political perspective that this was something that was here to stay and it was just a question of how it ought to be regulated. And third, we saw this kind of durable trend of our clients becoming increasingly interested in this space. And obviously, there was some waxing and waning through the cycles, but the sort of long-term trajectory was up and to the right in terms of that interest.

• 9:59Speaker 00

  And so the confluence of those factors led to us taking a series of steps that ultimately paved the way to some of the things that you see today, whether that's our Coinbase Prime partnership into Aladdin, supporting crypto, whether that's our originally Bitcoin Private Trust, followed by our Bitcoin ETF, IBIT, now our Ether ETF, ETH, as well as some of the stuff we've done in tokenization, our partnership with Circle as well in the stablecoin space.

• 10:28Ryan Sean Adams?

  Has this happened fast to you? Like, we've watched in the crypto space, we've watched interviews with people like Larry Fink, of course, who's kind of tells this story, right, about tokenization and stable coins, the interest areas of BlackRock. And I think I saw one interview where he really describes his own pivot on Bitcoin, right, where he was like, "I didn't think it was a thing, and now I do." And that has been kind of like a change. I imagine that's part of the story of getting comfortable with this asset class. Has that happened fast to you? Or has it been kind of like a gradual series of steps? And what sort of things did you really need to feel like at an institution like BlackRock in order to feel comfortable here?

• 11:10Speaker 00

  Yeah, it really is a multi-year progression. It's not something that happens overnight. And some of the steps along that journey that I alluded to, I think, were critical as a firm in building that comfort with the space and the conviction that we could provide BlackRock quality solutions for our clients in it. So, you know, there's a lot of education that happened. Obviously, there were waypoints that were significant in terms of building our own capabilities. You know, we talked about the Coinbase Prime partnership with Aladdin. That was a fundamental technology capability that we started working on in 2021 that ended

• 11:53Speaker 00

  up being critical to us being able to build IBIT and ETH in a way that was consistent with an iShares quality standard of robustness. We think about, you know, the Bitcoin Private Trust, which was much smaller, obviously, than IBIT has since become, but that gave us the fundamental capabilities on the asset management side around crypto. Our partnership with Circle, which really began in 2021, building familiarity and conviction around the stablecoin space and working on innovation opportunities around that. So, all these things kind of come together and they build. And, you know, in the case of Larry, obviously, he also deserves a lot of credit for the way that he leaned into this space.

• 12:38Speaker 00

  You know, we talk a lot at BlackRock about being students of the markets and students of technology, and Larry is really the ultimate embodiment of that. And his open mindedness and intellectual curiosity is how, you know, he's become so insightful on the space today.

• 12:54David Hoffman?

  Right, I think the average listeners would probably say, before listening to this interview, that the first thing that BlackRock ever did in crypto was the Bitcoin ETF, followed by the ETH ETF. I think that's maybe just like the typical perception that people might have. And so, it's perhaps new to people that BlackRock has actually been, has had a digital asset team for coming up on almost a decade now and has been working in the digital asset space. Maybe perhaps experimentally at first, but now in the era of 2023, 2024, like really committing to the space and things have started to move much quicker. How would you illustrate the arc of BlackRock's involvement with crypto?

• 13:35David Hoffman?

  Definitely accelerating now, but still looking to expand even further. It was just experimental at first and now things are really getting to, the rubber's really meeting the pavement. How would you characterize just like the arc of BlackRock and its relationship with crypto?

• 13:51Speaker 00

  Yeah, well, I think it's been an evolution to date that reflects the evolution that was happening externally in terms of where our clients were, in terms of where the state of industry, infrastructure and development was, in terms of where the state of the regulatory climate was. And so I think you're going to continue to see us respond in kind in a fairly agile way, as I think we've done, to those evolving dynamics. I think where we are today, we're quite proud of the handful of pretty significant access solutions that we've built for clients in this space. Obviously, there's lots of things that we continue to work on.

• 14:36Speaker 00

  And when the time is right, you'll start to see that progression unfold.

• 14:42David Hoffman?

  Can we get a little insight into the makeup of the BlackRock Digital Assets team? Who are you guys? What kind of skills do you have on the team? What are you guys working on? How big is it?

• 14:52Speaker 00

  Yeah, it was a great team. Obviously, we're quite proud of what we've accomplished, but the centralized digital asset team is really just one piece within the larger BlackRock machine that has built all these kind of products and solutions that we've done. So you think about Ibit and Ether, for example, that's built in concert with Our, you know, iShares org, of course, but also folks from Aladdin, from our technology org, from our operations org, from Risk and myriad other parts of the firm that is what enables us to build it in kind of a BlackRock quality way. Same thing we think

• 15:36Speaker 00

  about, you know, what we do with Circle and the cash management side, we're also the largest cash manager in the world and that, you know, whole team supports that. Think about what we built with Coinbase and Aladdin, you know, huge Aladdin engineering effort to make that possible. So Digital Assets team itself is a very kind of interesting, varied skillset of folks. You think of a mix basically of like consulting, investment banking, product strategy, investing, product management, engineering, sort of wrapped into this tightly knit, centralized part of the org that has helped drive the strategy across the various parts of our business.

• 16:20David Hoffman?

  Inside of the crypto world, crypto culture, we call ourselves crypto natives and just because kind of like a little test of like, are you one of us or are you not one of us? How would you, how would you illustrate the crypto nativeness of the BlackRock team?

• 16:35Speaker 00

  The Digital Assets team, it's a, it's a fairly crypto native group, but it does have a mix of folks who, you know, spent a lot of time in crypto, maybe, you know, for some of our younger folks, nearly all their careers in crypto, and then other folks who, who had, you know, more of a traditional finance or traditional technology engineering background before they ended up in crypto or ended up on this team.

• 17:00Ryan Sean Adams?

  So Robbie, let's talk about the big launch this year, which is the BlackRock Bitcoin ETF. I think you called it iBit. That happened in January, right? Was it Jan, January 11th?

• 17:12Speaker 00

  Yeah.

• 17:13Ryan Sean Adams?

  Okay. What were the expectations going into this launch? How did you guys think it would go? And then how did it go?

• 17:21Speaker 00

  Well, I think we did have reasonably high expectations for the level of client demand that would be there because we'd been having conversations with, frankly, hundreds of conversations with clients over multiple years and understood the significant frustrations that existed for many, in particular of our institutional and wealth clients of not being able to have a convenient turnkey, low-cost access vehicle in this space for Bitcoin in particular. And I think that what we discovered was that demand was maybe even larger than we thought it was. I personally had some very high expectations and estimates

• 18:03Speaker 00

  for it. It's exceeded even those. I think it's just a reflection of, for a lot of investors at this stage, they are resoundingly choosing IBIT as kind of the preferred vehicle for Bitcoin exposure.

• 18:19Ryan Sean Adams?

  So it went even better than you thought it would, and you thought it would go pretty well. So who's buying IBIT? What's the kind of the profile of a typical investor who's investing in this? Does it skew smaller? Does it skew larger? These are institutions, I would imagine, but what's kind of the general makeup here?

• 18:39Speaker 00

  Yeah, so think of our client base for iShares ETFs as really in three buckets. One is institutional, one is wealth advisory, and one is end investors direct. And out of those three, on day one, the only one that was really, sort of had the pipe unlocked in full was end investors. And so right out of the gate, the end investor demand was massive. For institutional wealth, it's a little bit of a different journey. Just because an ETF is listed and trades doesn't mean it's necessarily accessible. So when we think about wealth...

• 19:22Speaker 00

  Typically, for a wealth advisory firm to actually allow its advisors to put their clients in a new ETF, it's often a multi-year journey to get approved on these platforms. And so many of those firms are actually expediting their processes in response to what's been obviously a very significant demand, both from their advisors as well as their end clients. But still, that's what we're talking about, taking multiple years down to perhaps multiple quarters, right? And we've seen the first firms come online and approve that just in the last month or so, other than the RIA channel, which is a subset that moves a little faster.

• 20:04Speaker 00

  When we think about institutional, that's another matter entirely, where there's a lot of research and education and diligence that goes into institutions making a decision to actually make a strategic or tactical allocation to Bitcoin. And so that's a journey that we're on with them. We're having lots of conversations with institutional allocators, but it's still pretty early.

• 20:33David Hoffman?

  I think that education piece is something that excites the industry the most. Me and Ryan have been doing our best to educate as many people as we can on the Bankless podcasts and ever since we started it. But there's just so many people that we just don't reach. There's many institutional investors that simply just don't listen to Bankless. There's just not the right audience for us, which is why when BlackRock comes into the space and BlackRock starts educating people, everyone in the industry gets really excited because I think everyone in crypto understands that the most bullish thing for crypto is to simply be understood by more people. Can you just illuminate a little bit more about that educational process? How is that going? Is it hard? Is it an uphill battle? Are people interested in learning or are they just doing the bare minimum to justify their investment?

• 21:18David Hoffman?

  Speak a little bit more about what it's like to educate your investors and clients at BlackRock.

• 21:23Speaker 00

  Yeah, well, I think you can imagine that there's a pretty wide breadth of where our institutional clients, where institutional investors generally are with respect to this. There were some that already had positions in it, you know, before these ETFs got approved. That typically was a very burdensome process for most institutions to get through to set up trading, custody, operational procedures, risk management, et cetera, for this new asset class. But there were a few that did. And then there were a few that actually moved pretty quickly out of the gate, once these ETFs were available.

• 22:03Speaker 00

  But there are a lot who had never really, you know, seriously dug in and considered the question of whether they would allocate that when these ETFs launched, for the first time, they started to do that. But that's still, you know, in many cases, a long journey. You think of, you know, most of the TradFi firms that have become players in the space, they went on multi-year journeys to get to that point. Maybe for an institutional allocator, it's a little shorter now with all the, you know, work that's been done and infrastructure that's been created. But it is something that we're seeing, obviously, a lot of interest on. And I think there's frankly, a lot of confusion around how to think of this from a risk and return perspective.

• 22:47David Hoffman?

  One thing that the industry was all kind of like placing our bets on was how BlackRock and other ETF issuers were going to pitch Bitcoin and Ethereum to interested clients. Like Bitcoin is digital gold, kind of a very simple narrative. Ethereum, not as easy to speak about. So how have you guys landed on the right ways to convey the significance of each of these respective ETFs? Does the Bitcoin digital gold narrative land? And if not, what do investors like about Bitcoin? And same thing for Ethereum?

• 23:21Speaker 00

  Yeah, I think the digital gold narrative is a relatively simple and digestible one that tends to resonate with a lot of institutional investors, particularly as well as advisors. As you know, ETH can be a little more challenging. And so, you know, sometimes we think about kind of these two overarching narratives as global monetary alternative, which, you know, kind of rhymes with digital gold and store value, right? And bet on blockchain technology, innovation, adoption, right? And the latter, I think, is, you know, more consistent and more predominant with ETH.

• 24:05Speaker 00

  And the former is more predominant with Bitcoin. And I think the resonance of the two kind of depends on a person's background and interest and expertise, right? If I go to, you know, the engineering part of our digital assets team or our engineering org broadly, I would say, you know, it's probably four to one, people are actually more interested, more excited about ETH. If I go to, you know, a part of the firm that's more sort of portfolio management, trading, macro, et cetera, it's probably going to be the inverse of that, right? So for folks who are more sort of economics

• 24:49Speaker 00

  and finance versus the Bitcoin story resonates more naturally. And I think for folks who are more interested in the technology, they tend to get more excited about ETH.

• 24:58Ryan Sean Adams?

  Can we talk about another dimension of the pitch here, which is like risk return kind of profile in a diversified portfolio? I mean, I'm sure there's a conversation among BlackRock clients of, okay, we're bullish on this asset class, we're bullish on Bitcoin, we're bullish on Ether. So but like, how bullish? How should we express that? How much of it should we hold? Can you talk about the kind of the risk return profile? Is there like a BlackRock recommendation of if you are X, then you should have Y amount percent of your portfolio dedicated to this asset class?

• 25:33Speaker 00

  Sure. So you talked about education and what that journey has been like. I can tell you that a significant part of the challenge that our clients, particularly our institutional clients are having, is the narrative around how to think about Bitcoin from a risk perspective has been muddled. And I think it's actually just this amazing own goal that the industry has scored on itself. When we think about crypto market commentary, research type notes that exist, our view would be fundamentally Bitcoin is an uncorrelated asset. It has its

• 26:18Speaker 00

  own unique set of risks that are very distinct, and in some cases, probably you could argue inverted versus the risks that stocks and other so-called risk-on assets hold. But for some reason, and I have some theories as to how this happened, I don't think it was intentional, I think that sort of crypto research community has perpetuated and reinforced this narrative that Bitcoin is a risk-on asset.

• 26:49Ryan Sean Adams?

  Interesting.

• 26:51Speaker 00

  And that's been very damaging and confusing, because a lot of institutional investors, they kind of see and hear the digital gold thing, and they get it, and they see that role in its portfolio as a result. That's a little bit like gold, but it's going to be more volatile, more risky, higher upside, higher downside. But nonetheless, something that you think about as a potential hedge against money printing, currency debasement, inflation, geopolitical disorder, political fiscal stress in the US, etc. But then...

• 27:27Speaker 00

  You know, people talk about it, well, Bitcoin is down because, you know, non-farm payrolls came in weak, or the ISM manufacturing index was soft. And they go, what? And so it's fascinating because the industry has taken something that doesn't really have a fundamental basis and repeated it enough times, kind of blindly, that it's starting to actually seep into the narrative and the trading data in a real way. And so now you have to go, is it going to be more driven by what fundamentally makes sense? Or is it going to be more driven by what the narrative is saying? And that's where perception can become reality.

• 28:09Ryan Sean Adams?

  Robbie, are you kind of saying like, we got to pick a lane here in terms like, it's either a risk on asset or a risk off asset and sort of can't be both? Or like, what, how do you think, what is the correct way to think about this and to talk to investors from a risk return profile about this asset class?

• 28:24Speaker 00

  Yeah. Well, Bitcoin is obviously a risky asset.

• 28:28Ryan Sean Adams?

  Okay.

• 28:29Speaker 00

  But our view would be it is not a risk on asset, that that risk on, risk off framework that exists for traditional finance, and it has its shortcomings, obviously, as well, but it really just doesn't apply to Bitcoin. So when you try to extrapolate this idea Bitcoin is a risky asset, that makes it risk on, you know, we think that fundamentally doesn't make sense. Nonetheless, you see a lot of these crypto research outlets saying it, and to some extent, perception can become reality. And so when you look at, you know, some of the major disruptive events of the last five years, Bitcoin has generally performed very well coming out of those events, but

• 29:13Speaker 00

  sometimes it sells off at the start because of that reflexive programming to think of it as a quote, risk on asset. But then people look at it and go, wait. You know, chaos, turmoil, disorder, potential for money printing, government stimulus, et cetera, that actually is perhaps bullish for Bitcoin. And then you see the market reaction. Like, you know, if you look at the Silicon Valley Bank and regional banking crisis in March 2023, that was probably the best example of Bitcoin behaving kind of as a hedge, right? Bitcoin was up 30% in the span of a couple of weeks, as fundamentally, you know, would make sense when there's stress in the banking system and fears over

• 29:55Speaker 00

  that. I think the main reason that was such a clean anecdote for it was the crypto research community didn't have time to screw it up.

• 30:03Ryan Sean Adams?

  What do you say crypto research? Is that us? Is that basically the crypto industry? You think we're kind of like missing the ball here?

• 30:11Speaker 00

  It's really, we're talking about sort of the daily market commentary type stuff. You know, that there's Bitcoins off today, you know, this print, that number, whatever, you know, just reflexively linking everything back to something that must be happening in traditional markets in the economy like you would do for stocks, right? And so it happened so fast, market moved up. I'll bet you if that was a slower breaking crisis, we might have seen headlines like, oh, you know, headwinds for Bitcoin as, you know, fears exist in the financial system could be damaging for risk on assets, right? They would have programmed that narrative in. So that's what we're seeing. So that's confusing a lot of our clients.

• 30:51Ryan Sean Adams?

  Right.

• 30:52Speaker 00

  And that's part of the education journey we're on is trying to make sense of these competing dynamics to them.

• 30:58David Hoffman?

  I think maybe if I'm understanding your message, for people, communicators, news outlets, market commentators in the crypto space, it would perhaps behoove us to position Bitcoin as just more of a risk off, uncorrelated asset more than it has been, or what we've previously been doing of kind of saying it's a more of just like a risk on low interest rate phenomenon type asset.

• 31:21Speaker 00

  Well, I think that we're more interested in the truth. But I think that when you look at it from a fundamental perspective, this is a non-sovereign, scarce, decentralized asset, has no traditional counterparty or country-specific risk, that those properties would suggest that it has a very distinct set of risk and return drivers. Then what's going to drive the value of equities, fixed income and other so-called risk assets? So I think that just fundamentally, that is true. Now, it also happens to be massively beneficial for Bitcoin to the extent it is true and it's understood.

• 32:04Speaker 00

  Because when you look at this from a portfolio perspective, correlation is absolutely critical. So you'll see that and we have some work coming out around this. But we hear it all the time from our clients, from allocators, is they say, truly, the one thing we're watching is the correlation. If that correlation is elevated, as at times in its history it's been, it's not that interesting of an asset. It just looks like another kind of high-beta tech play. If that correlation is zero, or even more so if it turns negative in certain periods of disruption in macro and in geopolitics,

• 32:46Speaker 00

  then that becomes really interesting to institutional allocators. So it's all about that correlation.

• 32:53Ryan Sean Adams?

  All right. Well, I mean, that's why I would say, echo what David was saying earlier is like, welcome to the crypto education team to BlackRock. Because you can put this in terms that I don't think the existing crypto education media market has. And so you referenced some research coming out about this. I think prior to us hitting the record button, Robbie, you mentioned that this episode is probably going to come out on a Monday. So it's probably going to come out on the 16th. Do you guys have some research that you're going to be issuing this coming week, like about what we just talked about? Kind of correlation, what Bitcoin can do inside the typical portfolio? Give us a peek into that.

• 33:28Speaker 00

  Sure, so we do have a piece coming out and it's aimed at really being educational for our client base, particularly our wealth advisory and institutional client base. And it's focused on exactly what you described, which is how to think about the risk in Bitcoin, how to think about its return drivers, and what does that mean for it in a portfolio? And so I think it's going to be a piece that probably a lot of your viewers will be interested in, and we hope will help to dispel some of the muddle that maybe exists today around thinking about Bitcoin and risk.

• 34:04Ryan Sean Adams?

  I can't wait to see those numbers. I hope they're very high in terms of crypto as a percentage of the portfolio. Let's talk about the ETF with respect to regulators, because that has felt like to us that it's been hard to get regulators to also pivot their position on crypto. I mean, in the early 2010s, the first decade of crypto, let's call it, they were thinking crypto is like drug money, it's something nefarious, it's something in the dark web. I think that kind of narrative has held off US from giving the regulators the stamp of approval to crypto. That's why the Bitcoin ETF was a major breakthrough. I mean, we've been trying at that thing for an entire decade. And then to see the Ethereum

• 34:48Ryan Sean Adams?

  ETF shortly after that felt like a Christmas miracle. When did that happen? That happened in springtime, but it was surprising to us, let's just say, because regulators traditionally, particularly the SEC, have been a bit more bearish on crypto, let's call it. So can you describe, do you think that the regulatory environment is kind of softening with respect to crypto? And can you just describe the overall process of working with regulators? How has that been?

• 35:18Speaker 00

  Yeah, I think that there is a clear trend towards greater recognition of this as a technology and an asset class that has transformative potential in a number of positive ways, and that is here to stay. If you think back, not that long ago, maybe five years ago, was the last time We saw some serious consideration being discussed about whether Bitcoin would be banned in the US, right? Right. No serious person is talking about that today.

• 36:01Speaker 00

  So, in the span of five years, it's gone from that conversation to, you know, what are the right guardrails and regulatory regimes, et cetera, to harness the innovation from this, allow access in an effective way, and manage some of the risks around it that regulators are worried about. So, that feels slow for the industry, obviously, at times it can be painful and frustrating. It's a new industry that's grown to prominence very fast, there's a lot of energy behind it, a lot of capital behind it, people building really exciting disruptive things, and that energy wants to be able to progress.

• 36:44Speaker 00

  But I think, I'm encouraged by this trend, even though maybe taking longer than some would hope, to that point of recognition, and I do hope and believe we'll start to have more comprehensive and supportive regulatory regimes in the US in relatively short order.

• 37:04David Hoffman?

  New projects are coming online to the Mantle Layer 2 every single week. Why is this happening? Maybe it's because Mantle has been on the frontier of Layer 2 design architecture since it first started building Mantle DA, powered by technology from EigenDA. Maybe it's because users are coming on to the Mantle Layer 2 to capture some of the highest yields available in DeFi, and to automatically receive the points and tokens being accrued by the $3 billion Mantle Treasury in the Mantle Reward Station. Maybe it's because the Mantle team is one of the most helpful teams to build with, giving you grants, liquidity support, and venture partners to help bootstrap your Mantle application. Maybe it's all of these reasons all put together. So if you're a dev and you want to build on one of the best foundations in crypto, or you're a user looking to claim some ownership on Mantle's DeFi apps, click the link in the show notes to getting started with Mantle.

• 37:49David Hoffman?

  Launching a token? Don't let complex legal and tax issues slow you down. Toku provides specialized support to optimize your launch and ensure that you, as a founder, and your team, and your investors Get the most tax efficient outcomes. The Toku team understands the crypto space inside and out, and will ensure your token launch is fully compliant while maximizing tax efficiency. Toku can connect you with the best attorneys if you need them to make sure that you have the best advice. And Toku can help optimize your taxes so you pay the least possible amount of taxes while still maintaining legal compliance. With Toku's guidance, you can concentrate on building your company while Toku handles the logistics. Token launches don't have to be complicated. Talk to Toku today to get a free initial token valuation. Robbie, the Bitcoin ETF is about nine months old.

• 38:31David Hoffman?

  The ETF, six weeks, seven weeks old, really young. And really with ETFs, as far as my education has been around them, they age well over time. People, financial institutions get more comfortable with them. They get integrated into the financial system in different ways. And we're still not even a year into this whole process. Can you kind of illustrate for us what the next few years of the crypto ETFs, Bitcoin Ether ETFs, integration to the financial system looks like? Like what's left, what's, there's juice left to squeeze? What does that look like?

• 39:06Speaker 00

  Yeah, well, this is very early, as you know. You know, most ETFs don't really start to blossom until multiple years after they were launched. So the Bitcoin ETFs were quite an anomaly. And if you, if you kind of put into historical context, the fastest prior ETF to reach 20 billion in AUM was actually QQQ, which has been an extraordinary ETF, obviously. That did it in 661 days.

• 39:37Speaker 00

  And Ibit hit that in 144.

• 39:40David Hoffman?

  Wow.

• 39:40Speaker 00

  Right, so it really has been unprecedented in a lot of ways. And that's, you know, I said, trying to pat myself or ourselves on the back. It's a, it's a function of the demand that exists for this and the convenience with which a number of investors across different archetypes view the ability to access this in an ETF. But as we talked about a bit ago, it's still early in the process with a lot of the wealth advisory channel and with institutional. And I think a lot of institutions are looking at just what I described, which is they want to see consistently that correlation being low or even negative.

• 40:25Speaker 00

  And then the question shifts from Is this too risky for me to own to potentially, is it risky actually not to own any of this? Right? And so, you know, if there were another event that happened that were disruptive in traditional markets where Bitcoin performed very well, I think you would see that be a pretty significant catalyst to adoption. But for a lot of our clients, it's just a continued education journey. It's a continued journey of getting approved for advisors on more platforms. You know, we're going to continue to be along that, along that ride.

• 41:07David Hoffman?

  What can you say about any interest or demand for ETFs beyond Bitcoin and Ethereum? I know these two assets represent something like 70% of the total crypto market cap. But might we see further crypto ETFs out of BlackRock in the future? And is that something that you guys are interested in? Do you guys know if there's demand there? What can you say about that?

• 41:28Speaker 00

  Yeah, I think, you know, obviously these things evolve over time. You know, and so our approach to it will as well. I think today, what we do see is from an investment perspective, overwhelmingly, the interest is on Bitcoin and then Ethereum is a clear number two. And then not a whole lot for kind of the longer tail of crypto assets. But there are obviously some interesting projects being built. You know, in that longer tail, you know, some of them we're engaging with from a sort of operational and technology innovation perspective today.

• 42:11Speaker 00

  That may be, you know, part of the journey that ultimately leads to their greater adoption, including potentially as ETFs. But I don't think we're particularly close, frankly, to seeing more ETFs beyond the Bitcoin and ETH that we have today.

• 42:30David Hoffman?

  I think the ETFs are certainly exciting and it makes sense that this is a very big way that BlackRock is very involved in crypto. But I think we're all kind of excited to see what's over the horizon here. Because the ETF is actually more of a TradFi product. And we like DeFi, we like smart contracts. And so I kind of want to get into the world of tokenization. Larry Fink, in an interview, he alluded to this, that he alluded to that that his eyes are beyond the ETFs and he's more interested in this concept called tokenization. And then not too long after that interview, Bled the BlackRock Biddle Fund got launched, which now has over $500 million of AUM. Of course, tokenized treasuries on Ethereum.

• 43:13David Hoffman?

  Talk to us about the aspirations of the BlackRock Digital Asset Team when it comes to tokenization.

• 43:18Speaker 00

  Yeah, we're very excited about tokenization. A lot of the firm, as you noted, Larry, as well is excited about tokenization. This is something that has the potential to be massively transformative for financial infrastructure, particularly when paired with some of the DeFi applications that you can build around tokenized assets. I think we have to remember that we are super early on this journey towards tokenization. And I think there's three big things that need to happen for us to have kind of that inflection point moment where this really starts to accelerate in terms of its adoption.

• 43:58Speaker 00

  And that's one, a breadth of institutional-grade custodians who can support both crypto and tokenized assets. Two would be big credible trading marketplaces for tokenized assets, such that the liquidity value proposition that today is mostly theoretical around tokenization actually can manifest. And the third is regulatory clarity. And a big part of that is simply the recognition that if I tokenize a bond, that's a bond. If I tokenize- A stock or an ETF, that's a stock or an ETF, et cetera. So we're building on this journey.

• 44:39Speaker 00

  It's still super early, but if it happens, if that vision is realized, you know, we would have a vastly more efficient, accessible,

• 44:52Speaker 00

  low-cost, flexible financial system potentially than, you know, what exists with traditional rails. I think that's what gets everybody excited.

• 45:01Ryan Sean Adams?

  Do you guys probably have sort of a like framework or a roadmap for like what gets tokenized first? And of course, like in crypto, we call these real world assets just to distinct from our like imaginary, like, you know, internet money type of things that are crypto bearer instruments like a Bitcoin or Ether, the asset. But so let's talk about tokenization from the perspective of real world assets. Like what asset classes happen first?

• 45:27Ryan Sean Adams?

  I would say the original, you know, tokenized asset is probably dollars, right? The stablecoin is an example of tokenization. And David was mentioning the Biddle fund. There are others that are trying to tokenize treasury. So maybe bonds come next. But how does BlackRock think about this in terms of asset classes? Are there some asset classes that are more conducive to this? What are their criteria? How do you guys think it's going to happen?

• 45:49Speaker 00

  Yeah, well, obviously a lot of the focus today after tokenizing cash, i.e. stablecoins, has been, you know, tokenizing sort of stable value yield instruments of various forms. And there's been coalescence around that use case. And there's lots of good reasons for that. You know, once you move beyond that into what comes next, I think there's not nearly as much consensus today around kind of the second, third, fourth, fifth, most addressable, biggest value add asset classes. But certainly when we think about tokenization and what it could mean for our clients,

• 46:31Speaker 00

  the two headlines that we're focused on are access and cost, right? So what are some asset classes that are hard to access today for a lot of investors? And what are some asset classes that are really inefficient and costly to operate today? The tokenization can make more efficient.

• 46:49Ryan Sean Adams?

  That's interesting. Access and cost are two interesting dimensions here. And I want to ask the question because, you know, in the same way, five years ago, there were a lot of people in traditional finance that were skeptics on Bitcoin and Ether as an asset. There are also some skeptics that are bearish on tokenization in TradFi. Of course, like, no one that listens to Bankless, because we've been talking about this for years, but outside of Bankless, they would say something like, "Well, Robbie, we already have tokenization. You have tokenized products at BlackRock. They're called ETFs. That is the ERC20 of finance, an ETF. And we already have representations of bonds and stocks and securities markets. What is your pitch for the benefit of tokenization?

• 47:34Ryan Sean Adams?

  You mentioned kind of like DeFi earlier, and you'll make maybe the ability to kind of like program smart contracts that have if-then statements for like what you can do with certain tokens. But then you mentioned access and cost. So what's kind of the elevator pitch for someone who's a non-believer for tokenization? And who says, "We already have a traditional finance system. It works great." You know, like, have you seen securities? Like, the market's going well. What do you say to them?

• 48:03Speaker 00

  Yeah, well, first, actually, I'd say that that viewpoint within traditional finance is actually not that prevalent.

• 48:11Speaker 00

  That, you know, if you think back to kind of the first mainstream explosion of crypto and blockchain onto the consciousness of a lot of people, that was 2017, right? And in 2017, you heard a lot of blockchain, not Bitcoin, right? Now, there's some sort of challenges with that for a number of reasons. But putting those aside, that trade, so to speak, has been wrong, right? In this intervening period, Bitcoin and crypto, despite the boom and bust cycles, has, you know, continued to ascend. And a lot of the kind of early blockchain

• 48:53Speaker 00

  applications and these networks and consortiums that were built, oftentimes, you know, private blockchain applications have not flourished. That sentiment, though, still exists today, and it often takes the form of tokenization, not crypto. And I think that that is flawed as well. And in fact, a critical unlock to tokenization is going to be likely the adoption of crypto. Because when you think about it, what's riskier for large TradFi institutions? To have allocations in, you know, 1%, 2%, 3% to this new asset class,

• 49:38Speaker 00

  which is, you know, risky and somewhat unproven, high upside, you know, high potential downside? Or is it riskier to migrate potentially tens of trillions of existing financial assets onto this new technology paradigm? Well, when you think about it that way, the latter is obviously way riskier. So one of the ways that, as an industry, we're likely to derisk that is to build solutions and comfort and adoption around crypto that gets firms used to using blockchain rails. And ultimately, that's going to support the adoption of tokenization. Now, why do we think tokenization is valuable?

• 50:20Speaker 00

  The properties that you can build into a system that is tokenized versus our legacy system are immense, right? When you think about liquidity, real-time, instantaneous, riskless settlement, 24/7 trading, the fact that these assets become digitally native, transparent, interoperable, that we can remove a lot of the layers of intermediaries that had to exist in the current system, right? All these things create massive opportunities for efficiency, for financial inclusion, for access to a wider array of investments in a more efficient way. So that's what gets us excited.

• 51:00David Hoffman?

  Robbie, our industry is still very young. There's still a lot of things that we're learning how to do in the crypto industry. There's still a lot of infrastructure that is not totally mature yet. What kind of technology or crypto native infrastructure is still missing that would be very useful for BlackRock to become even more involved? For example, like digital identity has been something that has been an idea in the crypto space and not yet like a solved problem. And there's a handful of answers like this that I could give. What's kind of holding you back that still needs to get built out in the crypto side of things that would allow BlackRock to kind of operate more heavily in crypto?

• 51:39Speaker 00

  Well, digital identity was actually the first answer I was going to give because I do think that is absolutely critical. We have to figure out a way to be able to apply some of the KYC and AML practices that exist in traditional finance to tokenization for that to work, right? But we also need to be able to preserve privacy in the same way that privacy is critical for financial transactions today, right? So that hasn't been figured out and thankfully there's lots of smart people working on the digital identity piece and we hope to be able to contribute to that and come up with something that becomes a powerful industry utility.

• 52:23Speaker 00

  I think we're also at a position where these two worlds, for the most part, live in separate silos. When you think about exchanges, there are crypto exchanges and there are traditional securities exchanges, there's just not a lot of overlap. They're, for the most part today, are crypto custodians, then there are traditional custodians, again, not a lot of overlap. Ultimately, the point where this becomes very accessible and adopted, you're likely to see these things fuse together, right? When you think about kind of two seminal things that we did this year in terms of

• 53:03Speaker 00

  IBIT and ETH, the ETFs, as well as the first public blockchain tokenization that we did, which you alluded to, in some sense...

• 53:13Speaker 00

  Those look contradictory, right? Because the ETFs are taking a crypto investment exposure and putting it in a TradFi wrapper, but tokenization is taking a TradFi investment exposure and putting it in a crypto wrapper. But actually, there's nothing contradictory about it. What it reflects is, we have different clients who are at very different stages of their journeys around adopting this new technology paradigm and these rails. So for a lot of our clients today, it is much more convenient, they're much more comfortable holding Bitcoin or ETH through a TradFi wrapper, through an ETF.

• 53:53Speaker 00

  And for some of our clients, they're now integrated into the digital asset world, and they want the utility of being able to hold a traditional investment exposure, but hold it in a token that can move anywhere in the world in near real time, at near zero cost, and unlock some of the utility and liquidity benefits that that provides. And so, for a while, we're going to be in that parallel universe. But the faster they can converge, I think the better it's going to be for, you know, obviously for crypto, but also for tokenization adoption.

• 54:26Ryan Sean Adams?

  Robbie, what's interesting to you guys, to BlackRock about, and maybe just TradFi more generally, do you think about like DeFi, let's say? Because there is one view of the world, which is like, let's call it a crypto maximalist view of the world. It's basically like, DeFi is going to put all of TradFi out of business. All right? And this was a view that was maybe popular, like, you know, in 2010s. And like, the truth is probably a bit more that there's some kind of a convergence, as you were saying. That said, I mean, if DeFi was fully realized, then maybe we wouldn't need exchanges. Or like, you know, things like the NASDAQ in their current form, maybe it moves into some other form. So there is something to do with this idea of like, you know, Mark Andreessen calls it

• 55:11Ryan Sean Adams?

  "software eating the world." So like, what is here interesting to BlackRock about DeFi? And do you view it as a competitive threat at all? Or do you view it as a technology that you want to marshal and use?

• 55:25Speaker 00

  Yeah, it's a great question. I think that there are elements of it that every traditional finance firm should be excited about in terms of the innovation and efficiency and new opportunities that this technology can unlock. And when it comes to true DeFi, there are also elements that are clearly disruptive to a lot of parts of traditional financial services. That should get everybody's attention. It's not a good strategy to, you know, duck and hope that it passes and never comes to fruition. And I think, you know, to a lot of firms' credit that I see, you know, there is a sincere, genuine effort to lean in and

• 56:09Speaker 00

  understand DeFi and think about, you know, what TradFi can participate in and help build in that DeFi space. I think there will always be some demand for intermediaries, for trusted intermediaries. Most people do not want to run their entire financial life by themselves. Obviously, there's a role for self custody. Many people like self custody of crypto, but it's certainly not for everybody. And we all know lots of people who've lost assets via self custody, right? And so, you know, that's just one example. But when you think

• 56:52Speaker 00

  about the role that trusted intermediaries will play, I think they will be streamlined. I think they'll be more efficient. There'll be competitive disruption, but there'll still be some role there.

• 57:02Ryan Sean Adams?

  So as we get to the end of this conversation, Robbie, I think an overarching question that Bankless listeners were probably wondering coming into this, this conversation is like, you know, one of the first times we've, we've talked to BlackRock is, all right, what is BlackRock here to do in crypto? And we're sort of seeing it by action so far. So it seems very clear that BlackRock is here to create ETFs. And that's great. And that's been a, you know, like a net good. And, you know, everyone in the crypto industry is very excited about that. Also, education, educating investors. And I think a question is like, okay, what else? So maybe you could give sort of your answer to that question. What is BlackRock here to do in crypto?

• 57:44Speaker 00

  Well, I think when you look at what we've done, it's kind of an extension of what we do in our core business today, right? Which is, we provide access at low cost to investments, and we provide technology capabilities to our clients, right? And so when we approached this space, we found a pretty clear need, a pretty clear signal of demand from many of our clients for that same concept. So when you think about, you know, what we've done

• 58:28Speaker 00

  from an Aladdin perspective with our crypto capabilities, from a IBIT, ETH perspective, our work with Circle in the stablecoin space, and now our work in tokenization, it kind of all fits in that. So as this industry evolves, I think you're likely just to see that same pattern.

• 58:48Ryan Sean Adams?

  So what are we going to see next, Robbie, as we close this out? Like, what's next for BlackRock? Or what's next in this arc of, you know, TradFi adopting crypto?

• 58:57Speaker 00

  That one would be a hard one for me to, you know, share too much of. But I do hope people enjoy the Thought Leadership Research piece that will come out this week. I think there'll be a lot of interest and appreciation for, you know, some of that thinking around Bitcoin and its role in a portfolio.

• 59:19David Hoffman?

  Robbie, let's fast forward to 2030, so six years. Does BlackRock have like 10 tokenized projects? Or like 100 tokenized projects? Like about what kind of number are we working with in the long term here?

• 59:35Speaker 00

  Well, I think once you get to longer time horizons, it starts to become more binary, right? You know, I think it would be strange if 10 years from now, we had like seven tokenized funds. That would be an unlikely outcome, in my view. It's more likely none, or it's many, many, right? And that's the journey we're on today is experimenting and proving this out. The industry's maturing. I think anyone who proclaims that tokenization is absolutely definitively going to be the future state of finance, I think that's a bit of an extreme view and reflects undue

• 1:00:20Speaker 00

  certainty. Anyone conversely who says, you know, tokenization is silly and it's not going to work, I think that's also an extreme view. So the truth is somewhere in the middle. There's some probability that that future state happens and we're investing a lot of time and resources and energy into building around it. And hopefully, you know, we've got lots of tokenized funds, you know, five, 10 years from now.

• 1:00:44Ryan Sean Adams?

  Well, as you know, Bankless Nation, we are betting on the latter, a world of like much tokenization and many use cases for blockchain and crypto. Robbie, thank you so much for joining us today and guiding us on what's up at BlackRock. And yeah, looking forward to seeing what's next.

• 1:01:00Speaker 00

  Yeah, this was fun. Thank you, guys.

• 1:01:02Ryan Sean Adams?

  Bankless Nation, you got to end like this, of course. You know, none of this has been financial advice. Standard legal disclaimers apply. Crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.