Blackrock CEO Larry Fink didn’t just invest in USD Coin stablecoin issuer Circle, he wants its money too. And he’ll be bringing the No. 2 stablecoin, also known as USDC, deep into the traditional financial markets to do it.
On conference call Wednesday (April 13), Fink, the head of the $9 trillion money management firm, said Blackrock is already managing some of the $50.3 billion-worth of cash and treasuries that back Circle’s dollar-pegged stablecoin one-to-one.
Read also: Stablecoins Are Better, Safer, More Innovative Payments Solution Than Bitcoin
Eventually, he said he expects Blackrock to be the primary manager of those reserves, The Wall Street Journal reported.
“We look forward to expanding our relationship,” Fink said, per the report.
That matches comments Circle CEO Jeremy Allaire made to Forbes the same day, saying the partnership with Blackrock will help his firm “explore ways to apply USDC in traditional capital markets.”
See also: Unregulated Private Currencies Threaten Investors, Banks and Global Financial Stability
Circle announced Tuesday (April 12) that it had raised $400 million from investors, including Blackrock. The company has said it expects to make $438 million on its reserves in 2022, expanding to $2.2 billion in 2023.
Read more: Circle Raises $400M in Investment Capital
In announcing the $400 million funding round, Allaire pointed to the importance of the Blackrock strategic partnership, saying dollar-based “digital currencies like USDC are fueling a global economic transformation, and Circle’s technology infrastructure sits at the center of that change.”
The funding rounds, he added, “will drive the next evolution of Circle’s growth.”
See also: In Winning DeFi, Circle’s USDC Shows It Can Be the No. 1 Stablecoin
Circle has said that it plans to seek a banking license. That could be necessary, as the stablecoin report issued in November by the President’s Working Group on Financial Markets recommended that all stablecoin issuers be federally regulated and insured by the Federal Deposit Insurance Corporation (FDIC).
Read more: President’s Working Group Says Stablecoin Risks Warrant Legislation
Just Say No
That isn’t likely to make banking and securities regulators very happy.
While the potential impact of stablecoins on broader financial stability has long been a serious concern in the United States, the European Union and many other G20 countries, they have primarily been used to facilitate the trading of cryptocurrencies and in decentralized finance (DeFi) projects like lending platforms.
See also: FDIC Chair Calls Stablecoins a Top Concern as NY Fed Calls Them Unnecessary
But as Fink made clear this week, as well as in a March 24 letter to shareholders, Blackrock is already among the traditional investors pushing stablecoins — and other cryptocurrencies — into the mainstream financial markets.
Fink said he believes the Russia-Ukraine war and resulting Russian financial sanctions were among the factors accelerating governments’ discussions about digital currencies, including cryptocurrencies, stablecoins and central bank digital currencies (CBDCs).
Read also: Biden’s Executive Order Set to Fast-Track Crypto Policy
Most recently, in an April 7 advisory letter, the FDIC ordered all banks under its supervision to report any current or planned activities relating to cryptocurrencies.
“Crypto-related activities may pose significant safety and soundness risks as well as financial stability concerns,” the letter stated. “It is difficult for institutions to adequately assess the safety and soundness, financial stability,and consumer protection implications without considering each crypto-related activity on an individual basis.”
In the past week, Comptroller of the Currency Michael Hsu has warned banks that trading crypto derivatives would bring heightened scrutiny and suggested that issuers of dollar-denominated stablecoins would be required to make them interoperable — which is quite difficult when they are on different blockchains.
See more: OCC’s Comptroller Wants Stablecoins to Be Interoperable With US CBDC
However, a growing number of states have started issuing banking licenses to crypto industry companies.
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