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

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 247 trading the fact that these assets become digitally native transparent interoperable that we can remove a lot of the uh layers of intermediaries that have 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 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 Black Rock become more bankless that's right folks uh Black Rock on the podcast today the question is are they going bankless what are they up to in crypto black rock 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 is 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 at Black Rock is what are you here to do what are your intentions for the space I think uh listeners will be be maybe surprised that it was not the Bitcoin ETF that was black Rock's first foray

into crypto actually Black Rock has been interested in blockchain technology uh for almost a decade now seven years eight years uh and they have just more recently accelerated what they are doing in crypto uh with the black rock digital assets team I think that was kind of the thing that I was most interested in think about is like what are the Ambitions of this like kind of small Seal Team 6 digital asset team inside of Black Rock like what do they they've done the ETFs they've done one tokenized project what are they up to next and now

that black rock is our friendly neighbor uh we want to take the opportunity to kind of peek over the fence and see what they're doing over there see how friendly they are yeah see how friendly they are yeah I like now we got to live together I would say one thing about this uh episode is um 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 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 Bank list Nation

here's a day I never thought would come we have black rock on the bank list podcast we have Robbie mitnik here he is the head of digital assets at Black Rock Robbie welcome to bankless thank you thanks for having me on he Robbie as as you know we have a very crypto native audience and uh they know what black rock is they they they've heard of the organization but they may not know exactly what it does so in your words what is Black Rock what do you guys do over there sure well black rock is an asset management firm primarily uh 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 uh institutions in the world think uh Pension funds insurers Sovereign wealth funds endowments uh as well as uh end investors uh directly and we also are a provider of financial technology primarily through our Aladdin platform which you can think of uh as an endtoend uh technology solution for managing the

investment process that we deliver uh for some of the largest uh buy side investors in the world and how big is Black Rock 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 black rock actually is like what are what are the other metrics that that come to mind sure well we are a a global company obviously that headquartered in the US in New York but one way to think about size and scale is is that we manage roughly 10 trillion for our clients

around the world uh but it's important to remember that's money that uh we manage on behalf of clients those aren't black Rock's assets Black Rock doesn't own those assets ultimately those are managed for the benefit of uh our various clients that's that's still big though I mean your size is size it's about five crypto worths of assets over at Black Rock yeah you could look at it that way I guess so Robbie how did you guys uh find find yourself in digital Assets in in crypto like what what's the the full story because it seemed I think

to a lot of folks in the crypto industry that just like suddenly um Black Rock was here and it caught us by surprise a little bit but I'm I'm sure internally it's been kind of an evolution so what's the full history here yeah well it's been um a many year Journey uh even though you know maybe the headlines uh are are more concentrated to to the recent couple of years I think um the firm's exploration kind of began in 2016 that predates uh my time here I think uh initially there was a view that the

technology and the asset class was not quite ready for prime time uh for our largest clients for our usage uh at that point in in sort of 2016 time frame uh I joined in 2018 I was the first fully dedicated uh employee to the space uh was a very kind of wide openen mandate um to figure out uh what we could do with this exciting uh new technology uh and this new asset class the early years though we're focused much more on kind

of blockchain innovation and applications that was certainly where there was more Comfort um so we explored all manner of use cases across kind of our financial ecosystem built uh a lot of learning and and knowhow 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 uh that Evolution into the presence that we we now have which we think of the digital assets base uh

broadly as crypto stable coins and tokenization uh but that Evolution really I would say started to accelerate in kind of a 21 22 time frame and there were three big things that drove that uh one is that the uh state of uh 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 uh 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 it was just a question of how uh it ought to be regulated and third we saw this kind of dir trend of our clients becoming increasingly interested in this space and obviously there was some waxing and waning through the the Cycles but the sort of long-term trajectory was was up and to the right in terms of that interest and so the confidence of those factors led to us taking a series of steps uh that ultimately pav the way to

some of the things that that you see today whether that's our coinbase Prime partnership into Aladdin uh supporting crypto whether that's our originally Bitcoin private trust follow followed by our Bitcoin ETF ibit now our ether ETF ea uh as well as some of the stuff we've done in tokenization our partnership with circle uh as well in the stable coin space has this uh happened fast to you like I I we've watched in the crypto space we've watch interviews with um people like Larry thinkink of course who's kind of tells this story right

about you know tokenization and stable coins the interest areas of of Black Rock and I think I saw one interview where uh 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 I imagine that's part of the story of getting comfortable with this asset class has that happened fast uh to you or has it been kind of like a you like a gradual series of steps and what sort of things did you really need to feel like at an institution like Black Rock in order to

feel comfortable here yeah it 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 we're critical uh as a firm in building uh that comfort with this space and the conviction that we could provide Black Rock quality solutions for our clients in it so um you know there's a lot of Education that happened uh obviously there were way

points that were significant in terms of building our own capabilities you know we talk about the the coinbase prime partnership ship with Aladdin that was a fundamental technology capability that we started working on in 2021 that ended up being critical to us being able to build ibit and Etha in a way that was consistent with an ey shares quality standard of robustness uh we think about you know the Bitcoin private trust which was much smaller obviously than IET has 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 stable coin space uh and working on Innovation opportunities around that so all these things kind of come together and they build um and you know in the case of Larry obviously uh he also deserves a lot of uh credit for the way that he leaned into this space you know we talk a lot at Black Rock about being students of the Markus and

students of technology and Larry is really the ultimate embodiment of that um and his open-mindedness and intellectual curiosity is how you know he's become uh so insightful on the space today right I think the average listeners would probably say before listening to this interview that the first thing that black rock ever did in crypto was the Bitcoin ETF followed by the EF that's I think that's maybe just like the the typical perception that that people might have uh and so it's perhaps new to people that uh Black Rock

has actually been having has had a digital asset team for coming up on almost a decade now uh and has been working in the digital asset space uh 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 uh illustrate the Arc of black rocks like involvement with crypto uh definitely accelerating now uh but still looking to expand even further uh it was just experimental at first and

now things are really getting to uh the rubber really meeting the how would you characterize just like the Arc of Black Rock and his relationship with crypto 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 uh us respond in kind in you know

fairly agile way as as I think we've done uh to those evolving Dynamics I think where we are today you know we're quite proud of the you know handful of pretty significant uh access solutions that we've built uh for clients in the space um you know obviously there's lots of things that we continue to work on and and when the time is right um you know you'll start to see that that progression unfold can we get a little insight into the makeup of the Black Rock digital assets team uh who are you

guys uh what kind of skills do you have on the team what are you guys working on how big is it yeah it's uh it was a great team uh you know obviously we're quite proud of what we've accomplished but the centralized digital asset team uh is really just one piece within the larger Black Rock machine that um you know has built all these uh kind of products and solutions that that we've done so you think about um you know ibid and Etha for example example that's built in concert with our you know I

shares org of course but also uh folks from Aladdin from our technology org from our operations org uh from risk and you know Myriad other parts of the firm uh that that's what enables us to build it in kind of a black rock quality way same thing we think about you know what we do with circle on the cash management side also the largest cash uh manager in the world and and that uh you know whole team supports that think about we built with coinbase in Aladdin you know huge Aladdin engineering effort to uh make

that possible so digital asset team itself is a is a very kind of interesting uh varied skill set of folks you think of uh a mix basically of like Consulting Investment Banking product strategy uh investing uh product management engineering sort of wrapped into this uh tightly knit centralized part of the org that has helped Drive uh the strategy across the various parts of our business MH inside of the the crypto world uh

crypto culture we uh call ourselves crypto natives uh just because kind of like a little test of like are you one of us or are you not one of us uh how would you uh how would you illustrate the crypto nativeness of the Black Rock team of the digital assets team it's a it's a fairly crypto native group but it does have a mix of folks who uh you know spend a lot of time in crypto maybe you know for some of our younger folks nearly all their careers uh in crypto and then other folks who who had uh you know more of a traditional Finance or

traditional technology engineering background before they uh ended up in crypto or ended up on this team so Robbie let's talk about the the big launch this year which is the uh the Black Rock Bitcoin ETF I think you called it ibit that happened in January right was it Jan January 11th okay what were the expectations going into this launch how did you guys think it would go and then how did it go well I think we did have um reasonably high expectations for

the level of client demand that would be there because we'd been having conversations with that you know frankly hundreds of conversations with clients over multiple years and understood the significant frustrations that existed uh for many in particular of our institutional and wealth clients of not being able to have a convenient TurnKey lowcost access vehicle in this space for Bitcoin in particular and I think that what we discovered was that demand was

maybe even uh larger than we thought it was I you know personally had some very high expectations and estimates for it it's exceeded um even those I think it's just a reflection of U for a lot of investors at this stage they are resoundingly choosing ibid as the preferred vehicle for Bitcoin exposure so it went even better than you thought it would and you thought it would would go pretty well so who's buying ibit like what what's the kind of the profile of a typical investor who's

uh who's investing in this does it skew smaller does it skew larger uh these These are institutions I would imagine but like what's kind of the the the general makeup here yeah so think of our client base for iar ETFs as really in three buckets uh 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 uh

was end investors and so right out of the gate the end investor demand was was massive for institutional wealth it's a little bit of a different Journey just because an ETF is is listed in trade um doesn't mean it's necessarily accessible so when we think about wealth uh typically for a wealth advisory firm to actually allow its advisors to uh 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 uh very significant demand both from their advisers uh as well as uh their end clients um but still that's we're talking about taking multiple years down to perhaps multiple quarters right and we've seen the first firms uh come online and approve that just in the last month or so other than the the Raa Channel which is a subset that that moves a little faster um when we think

about institutional that's another matter entirely where there's a lot of research and education and diligence that goes into in tions making a decision to uh actually make a strategic or or tactical allocation to to bitcoin um and so that's a journey that we're on with them you know we're having lots of conversations with institutional allocators but um you know it it's still pretty early I think that education piece is something that excites the

industry the most uh me and Ryan have been doing our best to educate as many people as we can on the bankless podcast ever since we started it but there's just so many people people that we just don't reach there's many you know institutional investors that simply just don't listen to bank lists uh there're just we're just not the Right audience for us which is why when when Black Rock comes into the space and black rock 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 is it hard is it an uphill battle uh are people interested in in learning or are they just doing the bare minimum to you know justify their investment speak a little bit more about what it's like to educate your investors and clients at Black Rock yeah well I think you can um 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 the ETFs got approved that typically was a very burdensome process for most institutions uh to get through to setup trading custody operational procedures uh risk management etc 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 U but there are a lot who had never really um 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 uh you know in many cases a a long journey you think of you know most of the trafi firms that have become players in the space they went on multi-year Journeys to get to that point maybe for an Institutional allocator uh 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 one thing that the uh industry was all kind of like placing our bets on was how uh how black rock and other ETF issuers were going to pitch you know Bitcoin and ethereum to interested clients like Bitcoin is digital gold kind of a very simple narrative uh ethereum not as easy to to speak about uh so how have you guys landed on the right ways to convey the

significance of e each of these respective ETFs does does the Bitcoin digital gold narrative land uh and if not what do investors like about Bitcoin and same thing for ethereum yeah I think the digital gold narrative is a relatively uh simple and digestible one that tends to resonate with a lot of institutional investors uh partic as well as advisers as you knowe uh eth can be a little more challenging and so you know sometimes uh 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 and more predominant with eth and the former is more predominant with Bitcoin and I think the Resonance of the two

kind of depends on a person's for background and and interest and expertise right if I go to you know the the engineering part of of our digital assets team or or our engineering or broadly I would say you know it's probably four to one uh people are actually more interested more excited about eth if I go to you know part of the firm that's more sort of portfolio management trading macro Etc uh it's

probably going to be the inverse of that right um so for folks who are more sort of economics and finance vers 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 can we talk about another dimension of of the pitch here which is like um risk return kind of profile in a diversified uh portfolio I mean I'm sure there's a conversation among uh Black Rock clients of okay uh we're bullish on this asset

class we're bullish on bitcoin we we're bullish on E so but like how bullish how should we express that how much of it should we hold can you talk about uh the kind of the risk return profile is there like a black rock recommendation of if you are X then you should have y amount percent of your portfolio dedicated to this asset class sure so um you know 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 um it's actually just this amazing own goal that the industry uh has scored on itself when we think about sort of crypto Market commentary research type notes that exist um you know our view would be fundamentally uh Bitcoin is a isn't

uncorrelated uh asset it has its own unique set of risks that are uh very distinct and in some cases probably You could argue inverted versus the risks that you know stocks and other so-called risk on assets hold uh but for some reason and I have some theories as to how this happened I don't think it was intentional um I think that sort of crypto research Community has perpetuated and re reinforce this

narrative that Bitcoin is a risk on asset interesting 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 uh but but nonetheless something that you think about as a potential hedge against money printing

currency debasement inflation geopolitical disorder uh you know political fiscal stress in the US Etc but then uh you know people talk about it well bitcoin's 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 it's fascinating because uh 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 be more driven by what the narrative is saying and that's where perception can become reality so 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 yeah well Bitcoin is obviously a risky asset okay but our view would be it is not a risk on asset that that risk on riskof framework that exists for traditional finance and it has its shortcomings obviously uh 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 sometimes it sells off at start because of that reflexive programming uh to think of it as a quote risk on asset uh but then people look at

and go wait you know chaos turmoil disorder potential for money printing government stimulus Etc that actually is perhaps bullish for Bitcoin and then you see the the market reaction like if you look at the Sila Valley Bank uh 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 weeks as fundamentally you know would make sense when there's stress in the banking system and and fears over

that I think the main reason that was such a clean anecdote for it was that crypto uh research Community didn't have time to screw it up uh it happened what you say crypto research is that us is that basically the crypto industry you think we're kind of like missing the ball here it's really we're talking about sort of the the the daily Market commentary type stuff you know bitcoin's off today you know this print that number whatever um you know just reflexively linking everything back to something that must be happening in

traditional markets in the economy like you would do for for stocks right and so it 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 uh in the financial system could be damaging for risk on assets right they would sort of program that narrative in um so that's what we're seeing so that's confusing a lot of our clients right and that's part of the education Journey we're on is trying to make sense of

these uh competing Dynamics to them so I think maybe if I'm understanding your message for people uh communicators news outlets Market commentators in the crypto space it would perhaps behoove us to position Bitcoin as just more of a riskof uncorrelated asset more than it has been 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 well I think that you know 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 than what's going to drive the value of equities fixed income and other you know so-called risk assets right 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 right because when you look at this from a portfolio perspective correlation is absolutely critical right so you'll see that and you know we have some uh some some work coming out around this but um 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 this 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 uh disruption in uh macro and in geopolitics then that becomes really interesting to institutional allocators right so it's all about that correlation all right well I mean that that that's why I would say Echo what David was saying earlier is like welcome to the crypto Education team to Black Rock because you you can put this in in terms

that I don't think the existing crypto education media U like Market has and like you referenced some research coming out about this I think prior to us hitting the record button Robbie you you mentioned that uh this episode is probably going to come out on a Monday so probably going to come out on the 16th do you guys have some research that you're you're going to be issuing uh this coming week like about what we just talked about kind of correlation what Bitcoin can do uh inside the typical portfolio give us a peek into that sure so we do have a piece coming out um 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 describe which is how to think about the risk in Bitcoin how to think about its return drivers and what does that mean for it uh in a portfolio and so I think it's going to be uh a piece that probably a lot of your viewers will be interested in and we hope will help to dispel some of the muddle uh that maybe exists today around thinking about Bitcoin and risk