BlackRock boss Larry Fink sees a definite need for cryptocurrencies and distributed ledgers in the future. But he doesn’t see any of the existing crypto companies surviving long enough to make it happen.
The CEO of the world’s largest asset manager believes most crypto companies will fold in the wake of the collapse of Sam Bankman-Fried’s FTX empire, as mistrust permeates the decentralized finance market.
“I actually believe most of the companies are not going to be around,” Fink said in an interview with Andrew Ross Sorkin onstage at the New York Times DealBook Summit on Wednesday.
Commenting on the FTX collapse, Fink argues the crypto exchange failed to be a distributed “ledger that was open to the world.” Fink, who is a self-professed skeptic of cryptocurrencies, says FTX went against the whole foundation of crypto, which is its use as an open database of transactions accessible across all geographies.
BlackRock, which has around $8 trillion of assets under management, had thrown $24 million into the Bahamas-based crypto exchange FTX through a vehicle called funds of funds, alongside other Wall Street and Silicon Valley titans who pushed the valuation of the FTX to $32 billion before it imploded earlier this month.
But as FTX crumbles and other cryptocurrency companies look at bankruptcy options, Fink still believes the distributed ledger technology has a future: “I actually believe this technology is going to be very important. I believe the next generation for markets, the next generation for securities, will be tokenization of securities.”
Fink laid out the many benefits of crypto, which include instant settlement of securities, simplified shareholder voting, and no middlemen for transactions. “Think about it. It changes the whole ecosystem,” Fink said.
FTX and woke capitalism
Hours after his interview with Fink, Sorkin interviewed Sam Bankman-Fried, who claimed he did not “knowingly” misuse customers’ funds and defended his actions at FTX. In his first live interview since his company's collapse, Bankman-Fried told Sorkin at the DealBook summit, "I didn’t ever want to commit fraud on anyone. I was shocked at what happened this month.”
Critics of the former billionaire say his crypto empire was nothing more than a “Ponzi scheme,” with the new CEO of FTX John Ray III calling the mess unprecedented and a “complete failure of corporate controls.” The main key accusation leveled against Bankman-Fried was that he used customer money from his crypto exchange to fund risky bets at his trading firm Alameda Research, which SBF claims he didn’t do “knowingly.”
Regardless of whether or not Bankman-Fried acted fraudulently, Fink says some of the blame for the FTX debacle lies with the venture capitalists who invested large amounts of money into the firm. After Sorkin argued that the whole model of venture capital firms doesn’t translate to good due diligence, Fink retorted that the model of how Silicon Valley financiers green light investments needs to change.
According to Fink, as the world transitions away from investment without due diligence, venture capital investment will be more about science and less about hype.
“More and more venture capital money is going to be fundamentally in decarbonization,” Fink said, adding, “It’s not going to go to all this stuff that provided us good utility to get food quicker or find a taxi sooner. I think it will be much more hard science and require a lot more technical understanding.”
While BlackRock has previously said it is heading to net-zero, the asset manager still holds a large fossil fuel position. Fink said onstage that hydrocarbons will still be necessary 70 years into the future, but the company will also focus on carbon capture technology and scaling back its emissions.
Fink’s stance on oil and gas has gotten criticism from both sides of the political spectrum, with Republicans rallying against his firm’s “woke” capitalism, while Democrats and environmental activists have targetted BlackRock for investing in fossil-fuel producers.
