BlackRock opens up to Bitcoin investment

Darren Sinden

The two eligible funds are no lightweights and they contain more than $40.0 billion of assets between them

One of the worlds largest fund managers is to allow two of its funds to invest in Bitcoin.

BlackRock which oversees almost $8.0 trillion of assets has decided to open up its BlackRock Strategic Income Opportunities and BlackRock Global Allocation to investment and trading in Bitcoin derivatives, according to filings submitted to the US Securities and Exchange Commission (SEC).

The two funds are no lightweights and contain $25.40 and $15.390 billion dollars of assets respectively. Both vehicles are managed by Rick Reider, BlackRock’s chief investment officer in fundamental fixed income and co-head of fixed income for the Americas.

Though BlackRock is opening-up these two funds to Investments in Bitcoin it is doing so in quite a prescriptive fashion and will only trade in cash-settled Bitcoin futures and not in the coins themselves.

The CEO of BlackRock Larry Fink said in December that: “Bitcoin could be here to stay. It could have a real impact on the US dollar”. BlackRock, of course, was also retained by the Federal Reserve in 2020 to advise it on its QE and bond-buying programs.

Bitcoin prices have fallen more than 13.0% over the last week on a combination of concerns that included the prospect of tighter regulation for cryptocurrencies under the Biden administration.

Those concerns followed comments made by former Federal Reserve chair Janet Yellen, who is Joe Bidens preferred pick for the role of Treasury Secretary, and who was appearing in a confirmation hearing on Tuesday.

Janet Yellen suggested that US lawmakers should curtail the use of Bitcoin amid fears that it could be used to fund terrorism and that cryptocurrency transactions were mainly used for illicit financing and illegal activities.

Janet Yellen isn’t alone in having concerns about Bitcoin. The ECB president Christine Lagarde said last week that had been used for totally reprehensible money laundering activity.

However, in written comments submitted to the US Senate, the former head of the US central bank, indicated that she believed that cryptocurrencies could be a force for good saying that: “I think we need to look closely at how to encourage their use for legitimate activities while curtailing their use for malign and illegal activities”

She added that “If confirmed (as Treasury Secretary) I intend to work closely with the Federal Reserve Board and the other federal banking and securities regulators on how to implement an effective regulatory framework for these and other fintech innovations”.

Apart from the concerns about tighter regulation of Bitcoin and other cryptocurrencies, which would likely go hand in hand with the asset class moving more towards the mainstream. The digital asset community has also been concerned about reports of a so-called double-spend event on the Bitcoin blockchain.

A double-spend would occur if a Bitcoin holder could spend the same coin or fraction thereof twice.

Such events had dogged previous attempts at creating a viable digital currency and it was thought that Bitcoin’s architecture which required the Blockchain to process and validate every transaction within Bitcoin, would prevent this from happening. Because a second transaction using the same parcel of bitcoin under the same owner would be invalidated.

Concerns that a double-spend had occurred were initially raised by the fork monitor blog, however, it now seems likely that issue occurred because of a software glitch or error in a payments system rather than on the Blockchain itself.

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