WEBVTT - Wall St Goes Crypto: BlackRock and Coinbase 0:00:02.640 --> 0:00:05.840 This is Bloomberg Crypto and Daily Bloomberg I heard podcast, 0:00:06.040 --> 0:00:09.000 and I'm Stacy Marie Ishmael, Managing editor of Crypto for 0:00:09.000 --> 0:00:26.480 Bloomberg News. It's Thursday, September one. Black Rock, the world's 0:00:26.520 --> 0:00:29.720 largest asset manager, teamed up with the crypto exchange coin Base, 0:00:30.040 --> 0:00:32.519 in a move that both Wall Street and cryptotypes are 0:00:32.560 --> 0:00:36.239 watching pretty closely. Black Rock says the partnership will help 0:00:36.320 --> 0:00:40.280 clients more easily manage and trade their bitcoin. It's a 0:00:40.360 --> 0:00:42.760 deal that comes at an interesting time for coin Base, 0:00:43.040 --> 0:00:46.360 which posted a record one point one billion dollar loss 0:00:46.400 --> 0:00:50.280 for the second quarter of two The company shares have 0:00:50.320 --> 0:00:53.559 fallen at least fifty this year, but of course they 0:00:53.680 --> 0:00:57.080 rallied right after that partnership was announced because people were 0:00:57.120 --> 0:01:00.440 excited about the prospects for them. Coin bases shares have 0:01:00.600 --> 0:01:04.959 gained almost forty more than over three days, so you're 0:01:05.000 --> 0:01:08.040 really seeing some of the gains come back to coin 0:01:08.040 --> 0:01:10.959 basis stock that's down still more than six this year. 0:01:11.160 --> 0:01:13.480 Coin Based has also been facing a decent amount of 0:01:13.520 --> 0:01:17.919 regulatory scrutiny on multiple fronts. For more on this latest 0:01:17.920 --> 0:01:20.959 Wall Street four into crypto, I'm joined by Bloomberg reporters 0:01:20.959 --> 0:01:24.080 you each yang this black Rock deal is really a 0:01:24.160 --> 0:01:27.720 validation to show that coin Base is still very much 0:01:27.760 --> 0:01:30.720 a giant in the industry and cell brush, So it 0:01:30.800 --> 0:01:33.160 was essentially an effort to kind of bring into the 0:01:33.520 --> 0:01:36.880 black Rocks sort of technology fold bitcoin alongside all these 0:01:36.920 --> 0:01:48.800 other passets. You ashually welcome back to the podcast and 0:01:48.880 --> 0:01:51.080 still a first time guest, looking forward to have you 0:01:51.120 --> 0:01:53.240 on more. So, one of the things that was not 0:01:53.360 --> 0:01:57.760 necessarily expecting over the past couple of months was perhaps 0:01:57.960 --> 0:02:02.760 the rate of I wouldn't quite call it a detent, 0:02:03.160 --> 0:02:09.240 but at least the willingness of extremely traditional Wall Street 0:02:09.560 --> 0:02:15.160 firms large, very large and gigantic to engage with crypto 0:02:15.320 --> 0:02:17.959 in different ways. And one of the most recent examples 0:02:17.960 --> 0:02:20.480 that we've had about this is, you know, something you've 0:02:20.480 --> 0:02:24.000 both covered in different ways, which is, you know, black 0:02:24.120 --> 0:02:27.600 Rock teaming up with coin Base to offer kind of 0:02:27.600 --> 0:02:30.400 a range of different sorts of services to institutional investors. 0:02:30.760 --> 0:02:32.880 And so before we go too much into what that 0:02:33.000 --> 0:02:36.800 partnership says, can you just explain to people what black 0:02:36.919 --> 0:02:39.200 Rock does, why, and why they're such a big deal. 0:02:39.960 --> 0:02:43.040 So black Rock has eight and a half trillion dollars 0:02:43.120 --> 0:02:45.519 under management at the moment, that's trillion with a T. 0:02:46.480 --> 0:02:50.679 It's the world's largest money manager, and it does products 0:02:50.680 --> 0:02:53.440 pretty much ranging the gamut from you know, the most 0:02:53.520 --> 0:02:57.160 sort of index benchmark exchange traded funds, things tied to 0:02:57.200 --> 0:03:02.000 the SMP all the way through customized hedge funds and 0:03:02.120 --> 0:03:06.760 private equity. They're also, you know, since they're founding, they've 0:03:06.760 --> 0:03:11.760 been heavily involved in technology that analyzes risk and financial markets, 0:03:12.160 --> 0:03:14.120 and they kind of use it for the backbone of 0:03:14.160 --> 0:03:17.280 both their business as well as for their clients. So 0:03:17.440 --> 0:03:21.079 clients kind of can use their technology to analyze risks 0:03:21.120 --> 0:03:24.960 across their portfolios. So, uh, they're a massive firm. There 0:03:24.960 --> 0:03:28.040 are across markets, there are across geographies, and they're heavily 0:03:28.040 --> 0:03:31.359 involved in kind of the backbone technology of financial markets. 0:03:32.960 --> 0:03:36.040 And why are they now involved in crypto? So, I mean, 0:03:36.080 --> 0:03:40.120 I think black Rock has been watching crypto and digital 0:03:40.120 --> 0:03:43.800 asset markets much like many players in the financial industry, 0:03:44.440 --> 0:03:47.080 and you know, if you go back a few years ago, 0:03:47.120 --> 0:03:50.920 they were quite reluctant, like many sort of traditional financial players, 0:03:51.200 --> 0:03:55.600 to actually jump into crypto markets. And they're they basically 0:03:55.600 --> 0:03:59.720 say that they're acting now in response to demand that 0:03:59.760 --> 0:04:03.360 they see from their big institutional clients. So when their 0:04:03.400 --> 0:04:06.760 clients want to get into digital assets, namely and specifically 0:04:06.760 --> 0:04:10.200 bitcoin in their case, you know, they kind of feel 0:04:10.240 --> 0:04:13.960 like they have a business and kind of meeting their 0:04:14.000 --> 0:04:16.920 clients where they want to go and you achieve what's 0:04:16.920 --> 0:04:20.120 in as for coin base, so this is really a 0:04:20.240 --> 0:04:25.040 much needed validation for coin based, a company which has 0:04:25.080 --> 0:04:29.600 been through a lot especially he winds so far this year. 0:04:29.960 --> 0:04:33.080 We know that coin base UM laid off eighteen percent 0:04:33.120 --> 0:04:36.560 of staff, their stock has been dropping along with the 0:04:36.560 --> 0:04:40.920 the collapse of crypto prices. They also had to navigate 0:04:40.960 --> 0:04:45.479 some regulatory uncertainty with their their products, and we know 0:04:45.640 --> 0:04:51.240 that they've disclosed certain investigations by the SEC. So for 0:04:51.279 --> 0:04:54.320 a long time, I think the news that we've covered 0:04:54.360 --> 0:04:58.080 for coin base is really just negative for the company, 0:04:58.160 --> 0:05:01.760 and this black Rock do or is really a validation 0:05:01.800 --> 0:05:06.520 to show that coin based, as the biggest US crypto exchange, 0:05:06.600 --> 0:05:09.480 is still very much a giant in the industry, is 0:05:09.520 --> 0:05:14.479 able to sign on the biggest companies from other industries. 0:05:14.520 --> 0:05:18.760 Black Rock including UM and then Meta, the parent company 0:05:18.760 --> 0:05:21.920 of Facebook, is another example to to help them get 0:05:21.960 --> 0:05:28.480 on board with the crypto economy. So from coin basis perspective, 0:05:28.600 --> 0:05:30.839 and you know, to your point about this is good 0:05:30.839 --> 0:05:32.719 news for them. I think their shares were up like 0:05:32.800 --> 0:05:36.080 fifteen percent on the day when this news was announced. 0:05:36.400 --> 0:05:40.880 So coin bases getting institutional credibility from having a partnership with, 0:05:40.960 --> 0:05:44.960 as Stila explained, the biggest asset manager or money manager 0:05:45.000 --> 0:05:49.080 in the world. And you know, solo like black Rock 0:05:49.160 --> 0:05:52.080 is getting um kind of crypto credit. Right, You've got 0:05:52.120 --> 0:05:56.320 this very large, very established Wall Street giant now able 0:05:56.360 --> 0:05:59.880 to offer exposure and access to its institutional clients and 0:06:00.040 --> 0:06:04.880 way that feels less risky perhaps than some of the alternatives. 0:06:04.880 --> 0:06:08.120 But what specifically is this partnership about, Like, what does 0:06:08.160 --> 0:06:14.120 it enable them to do? There were two developments in 0:06:14.160 --> 0:06:17.360 the last month or so. The first is a partnership 0:06:17.400 --> 0:06:21.279 with coin base that allows clients of both companies to 0:06:21.600 --> 0:06:25.840 use Black Rocks technology, which is called a Latin to 0:06:26.680 --> 0:06:32.880 essentially monitor their risk and their exposures to bitcoin alongside 0:06:33.000 --> 0:06:36.560 all the other kind of assets stocks and bonds, derivatives, 0:06:36.600 --> 0:06:39.839 other kinds of assets that they have in their portfolio. 0:06:40.279 --> 0:06:42.520 So it was essentially an effort to kind of bring 0:06:42.560 --> 0:06:46.479 into the Black Rocks sort of technology fold bitcoin alongside 0:06:46.480 --> 0:06:48.800 all these other assets, and it was a partnership that 0:06:48.960 --> 0:06:53.280 then allows clients to kind of monitor their exposures at 0:06:53.320 --> 0:06:57.359 black Rock and then also use coin based to trade bitcoin. 0:06:57.839 --> 0:07:02.240 The second announcement was a black Rock product, a private 0:07:02.480 --> 0:07:07.560 trust product that allows large institutional investors to invest in 0:07:07.839 --> 0:07:12.040 big and you achieve you know, one of the things 0:07:12.120 --> 0:07:14.480 you've been reporting on obviously is you know, coin based 0:07:14.480 --> 0:07:18.960 earnings over the past several quarters and months, and you 0:07:19.280 --> 0:07:22.920 noted in this the story that you and Solo worked 0:07:23.000 --> 0:07:27.120 on that institutional investors accounted for about three quotas of 0:07:27.240 --> 0:07:30.760 overall coin based trading volume in Q one two and 0:07:30.800 --> 0:07:33.840 that training volume was you know, upwards of three billion dollars. 0:07:33.640 --> 0:07:39.440 So coin base clearly has an existing institutional user base. 0:07:39.920 --> 0:07:42.560 But this is also a way for them to allay 0:07:42.720 --> 0:07:45.280 some of the concerns elsewhere on wall streets about the 0:07:45.280 --> 0:07:49.000 fact that their retail business seems to be stagnating a 0:07:49.040 --> 0:07:53.400 little bit. Right While even though institutional users make up 0:07:53.720 --> 0:07:56.880 the majority of the training volume on coin base, coin 0:07:56.920 --> 0:08:01.080 based do generates most of his revenue from retail users, 0:08:01.280 --> 0:08:05.280 and the company management noted during their earning scud that 0:08:05.320 --> 0:08:09.200 they're still expecting retail users to sit on the sideline 0:08:09.600 --> 0:08:14.040 during the following quarter, just because we're still pretty much 0:08:14.080 --> 0:08:17.120 in the downturn in the cryptal market, and usually during 0:08:17.160 --> 0:08:23.000 crypto winter, retails are are more um less encouraged or 0:08:23.400 --> 0:08:28.240 or just not participating as much with treating and investing 0:08:28.280 --> 0:08:33.199 in crypto. So Quein bas is indeed a well recognized 0:08:33.320 --> 0:08:37.679 name among the institutional players, especially in the US. They're 0:08:37.760 --> 0:08:41.560 the first public company that gives them a lot of credibility. 0:08:41.920 --> 0:08:44.400 But then at the same time, we also recently wrote 0:08:44.679 --> 0:08:47.520 a story about the decline market share of Quein based 0:08:47.520 --> 0:08:51.480 on a global level, and um the reason being that 0:08:51.559 --> 0:08:57.240 Quein base doesn't have derivative products offering to the retail investors, 0:08:57.360 --> 0:08:59.719 and then a lot of the cryptal treating volumes are 0:08:59.800 --> 0:09:04.080 in the derivative space, so that means that those volumes 0:09:04.080 --> 0:09:10.000 are mostly being down over at exchanges abroad. So this 0:09:10.080 --> 0:09:13.160 is kind of you're describing something that an analysts speak 0:09:13.200 --> 0:09:16.640 would be a combination of headwinds and tail winds. They have, 0:09:16.760 --> 0:09:18.680 they have some stuff going for them and some things 0:09:18.679 --> 0:09:21.240 that are a little bit more challenging. I want to 0:09:21.280 --> 0:09:23.440 go back to what you mentioned though about you know, 0:09:23.760 --> 0:09:27.880 Goldman Sachs having previously done some work with with coin base, 0:09:27.960 --> 0:09:30.640 because it sounds to me like one of coin bases 0:09:31.440 --> 0:09:34.560 ambitions has really to become like the go to for 0:09:34.640 --> 0:09:36.240 Wall Street. Like, if Wall Street is going to do 0:09:36.240 --> 0:09:38.920 a crypto thing, you they should come to a crypto 0:09:39.040 --> 0:09:42.480 thing with coin base. Is there are there any other 0:09:42.520 --> 0:09:47.400 crypto companies that are trying to challenge that ambition? Well, 0:09:47.440 --> 0:09:49.640 I always say f t x in the US will 0:09:49.720 --> 0:09:53.680 be another key player. F t x U s also 0:09:53.880 --> 0:09:58.720 has UM has been investing a lot in the US market. 0:09:59.200 --> 0:10:03.680 They started UM from overseas market, but they've since launched 0:10:03.720 --> 0:10:07.560 in the US. They actually also recently expanded into equities trading, 0:10:07.880 --> 0:10:12.360 which is their attempt to capture a broader based of users, 0:10:12.400 --> 0:10:16.920 including the ming Stock retail investors. So they're seeing as 0:10:16.960 --> 0:10:21.920 another strong competitor UM in the US. Up next, you'll 0:10:21.920 --> 0:10:24.520 hear more from Bloomberg reports, uh Gang, and still a 0:10:24.559 --> 0:10:27.240 brush about the Wall Street partnership that's trying to bridge 0:10:27.280 --> 0:10:41.080 the gap between trad FI and defy black Rock partnering 0:10:41.120 --> 0:10:44.480 with coin based to make it easier for institutional investors 0:10:44.800 --> 0:10:48.240 to manage and trade bitcoin. But and so I want 0:10:48.240 --> 0:10:51.439 to go back to you know the second part of 0:10:51.480 --> 0:10:54.640 the black Rock deal, which is this private trust that 0:10:54.760 --> 0:10:58.400 you mentioned. There's a quote in or a reference in 0:10:58.400 --> 0:11:00.720 in the story that you wrote about this that said, 0:11:01.080 --> 0:11:03.920 you know, Larry Fink, who's the CEO of black Rock, 0:11:04.120 --> 0:11:07.120 said up to four years ago he just hadn't heard 0:11:07.200 --> 0:11:10.520 of any interest from clients seeking exposure to crypto. That's 0:11:10.520 --> 0:11:14.120 obviously changed enough for for them to be offering this 0:11:14.280 --> 0:11:18.439 right now. You report on lots of different major institutional 0:11:18.440 --> 0:11:22.000 investors asset manages. What are some of the to use 0:11:22.000 --> 0:11:23.720 a word we like to use here, like, what's the 0:11:23.800 --> 0:11:27.199 vibe shift that you're getting in terms of why these 0:11:27.200 --> 0:11:30.880 folks are increasingly comfortable with and why their clients are 0:11:30.920 --> 0:11:36.600 increasingly interested in this asset class Relative to Bitcoin, I 0:11:36.640 --> 0:11:40.800 think many larger traders feel like it is on relatively 0:11:41.000 --> 0:11:45.560 sure footing or more more stable footing than maybe some 0:11:45.640 --> 0:11:48.800 of the other smaller tokens in the digital market. So 0:11:48.840 --> 0:11:52.400 where you see the greatest interest from maybe the the biggest, 0:11:52.480 --> 0:11:56.600 most established traditional financial players are in those areas, those 0:11:56.640 --> 0:12:00.040 products which are on that kind of sure finn and 0:12:00.400 --> 0:12:03.320 financial and regulatory footing. I don't think it's a shock 0:12:03.400 --> 0:12:06.480 that bitcoin is the one that you know, people are 0:12:06.480 --> 0:12:09.040 most comfortable with. And there's those couple of factors I 0:12:09.080 --> 0:12:13.200 think that make the vibe feel different now, even in 0:12:13.240 --> 0:12:15.480 the depths of whether it's you call it crypto winter 0:12:15.600 --> 0:12:17.800 or just the meltdown that we've seen in the crypto 0:12:17.880 --> 0:12:20.800 Marcus this year. Like I think, you know, so so 0:12:20.920 --> 0:12:24.680 many people's initial reaction this this year was like that's interesting, 0:12:24.720 --> 0:12:28.280 but like why now, like the market has plunged, And 0:12:28.400 --> 0:12:30.920 I think the answer to that is about this kind 0:12:30.920 --> 0:12:34.400 of shift in mindset that some large financial players have 0:12:34.559 --> 0:12:36.920 had in the sense that like the regulatory setting is 0:12:36.960 --> 0:12:39.480 sort of more comfortable and sure now for at least 0:12:39.480 --> 0:12:41.480 some products than it was three or four or five 0:12:41.559 --> 0:12:44.760 years ago. They're more traditional institutional players in the market, 0:12:44.840 --> 0:12:48.280 so there's a kind of critical mass effect, and uh, 0:12:48.440 --> 0:12:50.920 that's sort of why the vibe does feel different, at 0:12:50.960 --> 0:12:56.080 least relative to certain digital assets. U A. G. One 0:12:56.120 --> 0:12:59.320 of the you know, kind of storylines that you've been 0:13:00.000 --> 0:13:02.200 reporting out and you know, we've we've sort of written 0:13:02.440 --> 0:13:05.240 several stories about this is the kind of this revolving 0:13:05.280 --> 0:13:08.800 door of folks leaving traditional Wall Street firms and banks 0:13:08.800 --> 0:13:11.600 and asset managers going to crypto, starting their own thing. 0:13:11.640 --> 0:13:16.959 Crypto joining crypto companies sometimes going back to those more 0:13:17.000 --> 0:13:20.439 traditional places, or you know, starting a crypto thing and 0:13:20.480 --> 0:13:23.480 those more traditional places. Is there anything that you've observed 0:13:23.480 --> 0:13:26.040 and you're reporting about the culture of these crypto companies 0:13:26.320 --> 0:13:34.040 that pose either opportunities or challenges in these more traditional partnerships. Hmm, 0:13:34.080 --> 0:13:37.440 that's a good question. I think even within the crypto industry, 0:13:37.480 --> 0:13:40.960 there's such a vast range of different types of companies, 0:13:41.000 --> 0:13:45.200 each with their different culture, so it's really hard to 0:13:45.600 --> 0:13:49.880 just calcularize it in one way. But I think in general, 0:13:49.960 --> 0:13:53.320 we know that the traditional finance industry is heavily regulated 0:13:53.559 --> 0:13:56.440 and the executive stars are are very much used to 0:13:57.360 --> 0:14:01.320 playing by rules and um, getting clear errands um for 0:14:01.440 --> 0:14:04.800 everything that they do or everything they say, for example, 0:14:05.200 --> 0:14:08.000 and then when they joined the crypto company, UM, we 0:14:08.080 --> 0:14:11.720 know that the industry is still very much exploring a 0:14:11.760 --> 0:14:14.640 lot of services and how they how they promote themselves, 0:14:14.679 --> 0:14:17.440 and then they're in talks with regulators to figure out 0:14:17.480 --> 0:14:20.600 the rules. So it is a work in progress, and 0:14:20.680 --> 0:14:23.880 we've heard of executives talking about how after they switched 0:14:23.920 --> 0:14:26.560 to crypto companies they not have to learn how to 0:14:26.600 --> 0:14:30.680 talk directly on Twitter for example, UM and to stand 0:14:30.680 --> 0:14:33.600 out along Twist West and as as their main form 0:14:33.680 --> 0:14:36.480 of communication, which is very different from what they used 0:14:36.520 --> 0:14:39.760 to do, which would have been getting approval from a 0:14:39.800 --> 0:14:43.280 communication person, sending out a press release, et cetera. So 0:14:43.440 --> 0:14:45.720 I think there are cultural changes that they have to 0:14:46.600 --> 0:14:50.040 adapt to. But then at the same time, UM cryptal 0:14:50.080 --> 0:14:54.000 companies UM differ from each other. Working at coin based 0:14:54.320 --> 0:14:57.120 UM will give you a very different experience than working 0:14:57.120 --> 0:15:00.800 for some of the cryptal startup that quh G and 0:15:00.840 --> 0:15:03.360 thank you Sila. You can find more of h G 0:15:03.480 --> 0:15:06.400 and silas reporting on the Bloomberg terminal on Bloomberg dot 0:15:06.400 --> 0:15:09.960 com or follow them on Twitter. UH is at U 0:15:10.440 --> 0:15:16.360 underscore young That's why U e q I underscore y 0:15:16.560 --> 0:15:20.520 A n G and Sila is at s A brush 0:15:20.880 --> 0:15:30.480 b R U s H on the next episode of 0:15:30.480 --> 0:15:33.440 Bloomberg Crypto. Why is there an image of a whale 0:15:33.760 --> 0:15:36.280 on the sleeves of the official uniform of the Chelsea 0:15:36.320 --> 0:15:39.680 Football Club? Why does a drone racing league need a 0:15:39.720 --> 0:15:44.240 crypto sponsor? And can crypto companies even afford to continue 0:15:44.280 --> 0:15:47.200 to spend billions of dollars of advertising in a market downturn? 0:15:47.400 --> 0:15:51.720 Crypto companies have committed two point four billion or more 0:15:51.920 --> 0:15:55.720 on sports marketing just over the past eighteen months. We'll 0:15:55.760 --> 0:15:58.400 talk about all of this in the latest episode on crypto, 0:15:58.440 --> 0:16:06.360 advertising and Sports. This is Bloomberg Crypto, a daily podcast 0:16:06.400 --> 0:16:09.520 from Bloomberg and I Heart Radio. For more shows from 0:16:09.520 --> 0:16:12.960 I Heart Radio, visit the I Heart Radio app, Apple Podcasts, 0:16:13.120 --> 0:16:17.040 or wherever you get your podcasts. Send us your comments, questions, 0:16:17.120 --> 0:16:19.960 or suggestions for the show to Crypto at Bloomberg dot 0:16:20.000 --> 0:16:26.000 net or find us on Twitter. We're at Crypto. The 0:16:26.040 --> 0:16:29.960 supervising producer of Bloomberg Crypto is Vicky Vergelina. Our senior 0:16:30.000 --> 0:16:33.480 producer is Janet Babin. Our producers are Mohammed Baruk and 0:16:33.480 --> 0:16:37.680 Sharon Barriro. Our associate producers ozanam Sideki Kai Butler and 0:16:37.760 --> 0:16:42.120 Moses sum Desta wonder At is our engineer. Original music 0:16:42.240 --> 0:16:47.440 by Leo Sidran. I'm Stacy Marie Schmal. We'll be back tomorrow.