Blackrock on the Acceleration of Digital Currencies

 Blackrock on the Acceleration of Digital Currencies

 

Blackrock, the world's largest asset manager, has presented an emerging equation as the Russia-Ukraine War enters its second month. Blackrock is studying the potential impact of the rapid acceleration of digital currencies in the world.

The CEO of the world’s largest asset manager, Blackrock, says the Russia-Ukraine war has a "potential impact on accelerating digital currencies." He confirms that Blackrock "is studying digital currencies, stable coins, and the underlying technologies to understand how they can help us serve our clients."

Blackrock CEO Larry Fink published his 2022 letter to shareholders on Thursday with a section on digital currencies. Blackrock is the world’s largest asset manager, overseeing more than $10 trillion.

"The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades," Fink wrote. After extensively discussing the impact of the war, the CEO noted:

A less-discussed aspect of the war is its potential impact on accelerating digital currencies. The war will prompt countries to re-evaluate their currency dependencies.

Several renowned investors have predicted that the Russia-Ukraine war could put the U.S. dollar’s role as the world’s reserve currency at risk. Earlier this month, veteran investor Jim Rogers, who co-founded the Quantum Fund with billionaire investor George Soros, said what is happening with Russia and its sanctions is the end of the U.S. dollar. Famed value investor Bill Miller shares a similar view.

Galaxy Digital CEO Mike Novogratz recently described, "We are entering a world that’s unknown where people are going to struggle to figure out what the reserve currency is."

The Blackrock boss proceeded to discuss central bank digital currencies (CBDCs). Even before the war, several governments were looking to play a more active role in digital currencies and define the regulatory frameworks under which they operate, he pointed out.

Fink then referenced the Federal Reserve’s study on the potential impact of the U.S. digital dollar. Federal Reserve Chairman Jerome Powell has repeatedly said that the Fed has not decided whether to issue a CBDC.

Fink outlined some of the benefits digital currencies could bring. He detailed how a global digital payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption.

"Digital currencies can also help bring down the cost of cross-border payments, for example when expatriate workers send earnings back to their families."

Regarding whether Blackrock will start offering crypto products and services to clients, Fink said:

"As we see increasing interest from our clients, Blackrock is studying digital currencies, stable coins, and the underlying technologies to understand how they can help us serve our clients."

In July last year, the CEO said that Blackrock saw very little demand for cryptocurrencies from clients. However, Fink said in April last year that he is fascinated by cryptocurrency and believes it could become a "great asset class." He also said that bitcoin makes the U.S. dollar less relevant and can evolve into a global market.

Nonetheless, he remained skeptical about crypto. In October last year, the Blackrock executive indicated that he shared a similar view with JP Morgan CEO Jamie Dimon, who said bitcoin is worthless. But all that has changed in the last month. As demand for the digital currency has surged due to the Russia-Ukraine war.