Coinbase Prime + Aladdin

In a major move, Coinbase, one of the oldest cryptocurrency exchanges and the first one to be listed on NASDAQ, announced a partnership with asset management giant BlackRock. 

Through this partnership, BlackRock’s institutional clients on its Aladdin platform, an end-to-end investment management tool with exposure to assets on Coinbase, will be able to manage their portfolios – specifically Bitcoin (for a start) on the same platform. 

In simple terms, Coinbase will provide institutional investors access to cryptocurrencies through BlackRock’s investment management tool. The exchange’s institutional investment arm – Coinbase Prime – will be key to this mechanism. More specifically, CoinBase Prime will provide services such as crypto trading, custody, prime brokerage, and reporting capabilities to clients on Aladdin. 

The partnership is monumental for the crypto economy in the sense that BlackRock, the world’s largest asset manager with over $9 trillion on its books, is paving the way for institutional adoption of cryptocurrencies and has decided to provide its client base with new access points to experience the world of decentralized finance. Consequently, Coinbase’s shares which were struggling (down 77% in 2022) for weeks prior to this announcement, jumped by 30% and have remained thereabouts since.

Although the initiative is largely welcomed by the crypto community, it has certainly raised some eyebrows as Coinbase is mired in regulatory troubles and is facing an investigation by the U.S. Securities and Exchange Commission (SEC) for allegedly allowing its American clientele to trade tokens which should have been registered as securities.

It remains to be seen whether BlackRock’s influence with the U.S. Federal Reserve and other key agencies will help Coinbase wriggle out of its legal quagmires. After all, BlackRock was called upon by the Fed for its expertise during the two worst crises of this millennium – the 2008 Recession and the 2020 Coronavirus pandemic. 

In 2008, BlackRock was asked to manage the toxic assets acquired from failing financial institutions such as AIG, Bear Stearns, Freddie Mac, etc., and in 2020 the company was selected by the Fed to purchase billions of dollars in debt from large corporations which were affected by the pandemic, while also managing the government’s relief expenditure.  

BlackRock’s interest in cryptocurrencies, or as it calls them, “digital assets” is not new. Earlier this year, the company participated as an investor in the seed funding round that raised $400 million for Circle Internet Financial – the parent company responsible for the second-largest stablecoin, $USDC. 

It has also been reported that BlackRock, like many other leading financial institutions, is examining the utility of cryptocurrencies in terms of asset tokenization, permissioned blockchains, stablecoin reserve management, etc. Blackrock CEO Larry Fink communicated to the company’s investors that a robust digital-money mechanism could potentially reduce cross-border payment costs, streamline settlements, and prevent money laundering.

As far-fetched as it may seem at the moment, BlackRock’s political clout and its stake in lobbying the U.S. Congress can help introduce reasonable regulations, giving greater credence to the crypto market in the world’s largest economy. Possibly many other regions will follow suit as an institutional inflow of funds drives development and leads to greater utility for the masses. 

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