Asset management firm BlackRock has partnered with crypto exchange Coinbase to prepare a Bitcoin (BTC) investment product for institutional investors.
Shares of Coinbase ( COIN ) jumped 15 percent to $92.61 after the announcement. Coinbase shares have lost more than 67 percent in value this year.
Through this investment product, BlackRock users can use the Aladdin investment management system to manage BTC and other portfolio assets such as stocks and bonds.
The system will also facilitate trading and financing through the Coinbase exchange. Blackrock explained that the product will focus on BTC.
BlackRock’s move underscores the involvement of Wall Street market players in the crypto sector despite the crypto market experiencing a sharp decline this year.
Bitcoin investment products from BlackRock
BTC has lost about 50 percent of its value by 2022. Failure of the Terra ecosystem (LUNA) and bankruptcy hedge fund Three Arrows Capital has led to increased regulatory scrutiny.
Coinbase is facing scrutiny from the US Securities and Exchange Commission (SEC) for trading digital assets that are not registered as securities.
BlackRock chose Coinbase as a partner because of the exchange’s role in trading, custodial services, mediator and reporting capabilities.
Bloomberg Reporting, Oppenheimer & Co analyst Owen Lau said the regulatory risks associated with the BlackRock-Coinbase partnership are manageable because it only involves BTC, which has a clear regulatory status compared to other digital assets.
Lau added that the partnership is a confirmation of the future of blockchain and digital assets. This is very positive for the crypto industry and for Coinbase.
Joseph Chalom, BlackRock’s Head of Strategic Ecosystem Partnerships, said: “Our institutional clients are increasingly interested in investing in the digital asset market. They want to effectively manage digital assets.”
Institutional investors accounted for 75 percent of Coinbase’s trading volume of $309 billion in the first quarter of 2022. Coinbase users include hedge fundcompanies and asset managers.
Brett Tejpaul, head of Coinbase Institutional, and Greg Tusar, vice president of institutional products, said the partnership between Coinbase and BlackRock and Aladdin is a major achievement for the exchange.
Coinbase is committed to pushing the crypto industry forward and unlocking new approaches as crypto adoption institutionally increased rapidly.
For BlackRock, the partnership is a step into the digital asset sector. CEO Larry Fink said he considers the importance of digital assets and stable coins and customer benefits.
BlackRock is joining a group of investors in Circle Internet Financial, the issuer of USD Coin, with the intention of becoming the primary manager of the group’s cash reserves. [ed]