"I believe there are some opaque operations among market makers, which is completely different from the top 50 companies in the stock market."

Compiled & Edited by: Deep Tide TechFlow

Key Points Summary

Guest: Samara Cohen, Chief Investment Officer of BlackRock ETF & Index

Host: Jason

Podcast Source: Empire

Original Title: BlackRock's Crypto Strategy In 2025 With Samara Cohen

Broadcast Date: April 28, 2025

This episode of the podcast features Samara Cohen discussing BlackRock's cryptocurrency strategy in 2025. We delve into the reasons behind the successful launch of Bitcoin ETPs, investor demand for cryptocurrencies, Samara's optimistic view on tokenization, and how to bring traditional assets onto the blockchain, among many other topics.

Highlights

• Bitcoin is indeed a new asset class, and as a borderless store of value, Bitcoin's ultimate state resembles gold more.

• Bitcoin tends to rise more sharply and fall more gently.

• In the Bitcoin ETP space, most buyers are still hedge funds.

• We are currently very focused on tokenized money market funds and tokenized government bond funds, as the liquidity of cash and collateral in capital markets is poor, and blockchain technology can clearly improve this issue.

• For L1 and L2 projects in the crypto market, I don't think there's a need to specifically pitch them to BlackRock.

• I don't think Ethereum's positioning is more complex than that of other altcoins. In fact, I believe the entire crypto space has issues with data and standardization.

• Among the top 50 tokens on platforms like CoinGecko or CoinMarketCap, I have no confidence in about 40 of them. I believe there are some opaque operations among market makers, which is completely different from the top 50 companies in the stock market.

• Stablecoins were initially about bringing the dollar onto the blockchain, and then we started bringing government bonds and money market funds onto the blockchain. Next, I believe we will see on-chain credit emerging, bringing credit onto the chain.

• Finding technological applications that solve real problems is much better than simply turning illiquid assets into liquid assets.

• In the current post-crisis era, the funding support capabilities of banks and governments are limited, so we need to expand capital markets to drive economic growth.

• The collaboration between digital-native crypto companies and traditional financial firms is crucial. We need to think about what constitutes a suitable portfolio, how to attract investors, how to create solutions, and how to market, as the significance of branding becomes increasingly important.

Introduction

Jason:

Hello everyone, welcome back to Empire. Today's conversation excites me greatly. I usually don't read the guest's resume at the beginning of the show, but this time I feel it's necessary because this is one of the most impressive resumes we've encountered on Empire.

Our guest today is Samara Cohen, the Chief Investment Officer of BlackRock's ETF and Index Investments, responsible for managing approximately $7.8 trillion in market quality and investment integrity for BlackRock's index funds and iShares ETFs. Before joining BlackRock, Samara was a Managing Director in Goldman Sachs' securities division.

Additionally, Samara has been recognized as one of the Most Influential Women in Banking by American Banker and has been named one of the Most Influential Women in Finance by Barron's for four consecutive years. She is also a board member of SIFMA and the BlackRock Foundation. One interesting point is that she studied drama in college.

I wonder what your actual role at BlackRock is and how you view it? If possible, could you provide some numbers, like the size of your team? Is the $7.8 trillion figure accurate? I’d like to hear your perspective on your role.

Samara Cohen:

I think if you want to understand the most important number in my role, it’s the number of global investors entering the market through iShares ETFs and BlackRock index portfolios, which has surpassed 100 million. Our goal is to add another 100 million investors, hoping to drive people's retirement and financial health. The more people participate in the market, the more they can enjoy the benefits of global economic growth. ETFs and index investing have been a disruptive technology over the past 50 years, enabling more people to participate in the market.

My responsibility at BlackRock is to oversee how we convert indices into investable portfolios. Half of our assets are in other types of fund forms, which are index portfolios, while the other half are ETFs. Therefore, many ETFs package index portfolios into ETFs, although an increasing number of ETFs are also used for non-index investments.

Jason:

What do you think BlackRock's role is globally? What is your main work?

Samara Cohen:

I have an almost "elder statesman" perspective on this. In fact, it depends on who you ask and how long ago. I think working at BlackRock, but BlackRock is actually my first job after college.

You might be interested in a film about the history of index investing that was released on YouTube a few weeks ago, called "Tune Out the Noise." Interestingly, index investing didn't really mature until commercial microchips became available, as simultaneously buying thousands of securities to form a portfolio required a lot of computing power.

At that time, BlackRock did not yet have an ETF and index business. I was a graduate with a dual degree in finance and drama, but all my summer experiences were working in local theaters. I wanted to see what I could do with my finance background, and I was attracted to this company, which was then called BlackRock Financial Management, indicating that their mission was to provide better risk management technology for investors in the mortgage-backed securities market, which was BlackRock's expertise at the time. Although I didn't fully understand what that meant at the time, I loved the mission of helping ordinary investors manage risk better. So, I ultimately chose this company, BlackRock, and I was employee number 134. Now we have over 20,000 employees, but I was employee number 134. Even though we now have over 20,000 employees, I still believe that the fundamental mission of helping investors manage risk and enter the market remains as real today as it was when we started as a company.

Difference Between ETF and ETP

Jason:

Can you explain the difference between ETF and ETP ? And how has BlackRock's business evolved? How should we view BlackRock as a company?

Samara Cohen:

Let's start with definitions. ETP is a category that represents Exchange Traded Products, while ETF is a subcategory of that, meaning Exchange Traded Fund. These two terms are often confused in the industry. I'm glad you asked this question, especially since I didn't give you a heads-up about it. But we think it's helpful to distinguish between the two as more products fall under the ETP umbrella. Some products may be referred to as ETPs, or even ETCs (Exchange Traded Commodities), but in the U.S., these terms are not widely accepted. An ETC is neither a fund nor a diversified index fund or a passively managed portfolio. Therefore, while these two terms are often used interchangeably in the industry, ETF is more common, while ETP is a broader category.

BlackRock was founded in 1988. In fact, BlackRock acquired Barclays Global Investors in 2009, and since then, iShares has become part of BlackRock, which began focusing on the ETF and index business. At that time, this was actually controversial in the industry, as many people did not realize that active management and index investing could coexist.

Jason:

As a member of BlackRock's Global Executive Committee, how do you view the company's business? Can you tell me about BlackRock's different business lines and how you view the overall development of the company? I'm particularly interested in where cryptocurrency and Bitcoin might fit into BlackRock's overall profits and losses.

Samara Cohen:

I have been on BlackRock's Global Executive Committee for three years, and I returned to BlackRock ten years ago after working at Goldman Sachs for 16 years. It can be said that working as part of an asset management company, especially at BlackRock, is very different from my trading experience at Goldman Sachs. We place a strong emphasis on mission; our mission is to help people invest better and help more people achieve financial health. We review the company's long-term goals every five years, write relevant content, and engage in extensive internal communication with employees to ensure everyone truly understands our direction. Therefore, as you can see, we have made some adjustments in recent years, as we believe we need to make progress in certain areas in the future to help more people achieve financial health.

We know we need to scale further in the private markets, which explains several significant transactions we announced over the past year, including our partnership with GIP and the pending transaction with HPS. Our work in digital assets, tokenization, and more broadly considering retirement and retirement portfolios is all aimed at adapting to the current new macroeconomic environment.

New Market Regime

Jason:

What is your view on the current macroeconomic environment?

Samara Cohen:

Over the past year, we have gained many new insights into the market, and it is indeed a unique market. As a professional with 30 years of market experience, I can recall several instances in my career where such unique market environments have occurred. In the past five years, I have experienced more of these moments than in the previous 15 years.

I believe that the uncertainty in the market has increased over the past few years, especially since the COVID-19 pandemic. I have been thinking about what this change means for market resilience, adaptability, and how to reposition in the face of rapidly changing information. In fact, we have seen the development of ETFs partly due to this growing demand, as ETFs provide a simple and convenient way to enter the market. For example, our conversation is taking place just weeks after tariffs were first announced, and we have seen record trading volumes in stock ETFs and fixed income ETFs. For instance, the proportion of ETF trading in the U.S. stock market is typically positively correlated with the VIX (Volatility Index). Before April 2, this proportion was around 27% or 28%, while on some days in the past two weeks, it surged to 40%. This is because if you want to quickly adjust risk, ETFs offer a transparent and straightforward method. Therefore, I believe the development of ETFs is closely related to how to provide more access and flexibility in a rapidly changing market.

Active vs. Passive Investing

Jason:

Assuming we have entered an era that can be broadly described as high volatility. Now ETFs seem to account for over 50% of the fund complex and between 13% to 20% in the stock market. I think the traditional view might suggest that in a high-volatility era, you might need more active strategies and active managers, while in a less volatile economic environment, you might lean more towards passive or index investing. How do you view the role of ETFs in a high-volatility market?

Samara Cohen:

I am an index portfolio manager, and my husband is an active manager pursuing alpha. But in reality, managing ETFs or index portfolios is not entirely passive. Moreover, it may be more important that investors decide to use ETFs or incorporate them as part of their index strategy, which is certainly not passive, and I think this point is very important.

Looking back at BlackRock's trajectory since the acquisition of BGI in 2009, active investing and index investing are actually a spectrum that investors can leverage to build portfolios and decide when they need core beta building blocks and when they need high conviction in single securities. In the post-COVID era, some of the largest institutions adopting ETFs that we have observed are asset managers like BlackRock using ETFs in their portfolio strategies, particularly in fixed income ETFs.

As for the statistics you mentioned, I think your observation about the current proportion of the stock market in ETF or ETP packaging is roughly correct, but the proportion in the bond market is much lower. About 1% to 2% of the fixed income market is in ETP packaging. Of course, for those of us closely monitoring the market, the proportion of Bitcoin is around 5%, sitting between stocks and bonds.

Launch of BlackRock's Bitcoin ETP

Jason:

Let's talk about Bitcoin. Before 2024, we discussed whether to launch Bitcoin products. Was this decision driven by regulatory factors, investor demand, or market structure? Do you think the market structure is mature enough, and is the transparency of exchanges high enough to have contributed to this decision?

Samara Cohen:

All three aspects have an impact, but initially, it was primarily based on investment arguments and client demand. Typically, the order of investment arguments, client demand, market structure readiness, and regulatory background follows this sequence. Ideally, regulation should follow this trajectory, meaning that appropriate regulation can only come after the market structure is in place, and these factors influence each other.

It is also worth noting that our first Bitcoin product was actually not an ETP, but a private trust we launched in 2022. Although we established a digital assets team in 2020 and did a lot of work on the investment applications of blockchain technology, it wasn't until we launched that institutional product in 2022 that we truly began to engage with Bitcoin. This was a key moment for us, allowing us to gain deeper insights into workflows, risk management, and systems, laying the technical foundation for supporting ETPs later on. As you mentioned, we launched and submitted the ETP in 2024, but by 2022, we had already received a lot of client feedback expressing a desire to access Bitcoin and dissatisfaction with existing alternatives, building their investment arguments around this. The change in demand compared to five years ago is quite significant.

Regarding ETPs, while you can have the best technology and trading capabilities, a market ecosystem is needed for ETPs to function. In the case of Bitcoin ETPs, this is not only an interesting exercise in assessing the structure of the crypto market but also involves evaluating key interoperability, as Bitcoin ETPs serve as a bridge connecting the crypto market with the ETP market. Lastly, I want to say that this process has indeed been lengthy. Initially, when we discussed Bitcoin ETPs, I was surprised that people in the crypto space considered this very important. ETPs and cryptocurrencies are both seen as disruptive technologies that help people enter the market more easily. What impressed me was that the first time I bought Bitcoin, the process of understanding the ecosystem took less than two minutes, so I had to clarify this value proposition. Although the ETP packaging may seem to undermine the commitment to the Bitcoin market structure, I understand that the reality of the crypto market structure is that there are many value-added areas in traditional finance, which is why we see demand for ETPs.

Jason:

How does a company like BlackRock make such decisions? I see there are usually three ways: one is top-down, where the CEO says, "We are going to do this." Another is bottom-up, where salespeople hear client feedback and report it up the chain. The third possibility is that someone in the executive team is very supportive and believes we must make a move in the crypto space.

Samara Cohen:

Ideally, all three scenarios occur. Our journey into cryptocurrency has unfolded in the public eye. Depending on the characteristics of the company, we are students of the market, and our views on certain issues may evolve continuously. The client feedback we heard in 2020 and 2021 has changed significantly compared to a few years ago, as clients began to see cryptocurrencies as potentially playing an important role in diversifying their portfolios. It is worth mentioning that I always remember the birth of Bitcoin because my daughter was born on October 10, 2008, shortly after the Bitcoin white paper was released.

While this asset class is relatively young, when assessing its role in asset allocation strategies, we need top-down market interest, and as client feedback increases, bottom-up interest is also growing. Additionally, there needs to be internal supporters for education and engagement who have patience. I think our head of digital assets, Robbie, is a prime example in this field, and he has done an excellent job.

Reasons for the Success of IBIT Launch

Jason:

Why was the launch of IBIT so successful? It is one of the most successful cases in ETP history.

Samara Cohen:

I learned some practicalities about the packaging of ETPs and its role in bridging crypto and traditional finance. In 2024, we found that there was a significant demand from the crypto community for ETP packaging. Overall, about half of IBIT holders are self-directed investors, while the other half are retail and advisor-type investors.

(Deep Tide TechFlow Note: IBIT refers to The iShares Bitcoin Trust ETF, which provides an investment method similar to directly holding Bitcoin.)

Jason:

So 50% are self-directed investors, for example, I have a TD Ameritrade or Charles Schwab account, and I just click to buy on my account.

Samara Cohen:

Yes, 50%. The other 50% is roughly divided between advisor-type and institutional investors. Among self-directed investors, data shows that three-quarters of them have never held iShares before. This indicates that they had not previously purchased iShares ETPs. While we have many products, since iShares is the leader in this field, it can be said that for these individuals, they opened brokerage accounts and purchased their first ETP because they wanted to put Bitcoin in an ETP, possibly because they needed institutional-level custody and trading transparency. Moreover, they may not want to frequently move in and out of the crypto ecosystem, as that can be cumbersome.

Jason:

Yes, there may be a "too big to fail" mentality. Many of my friends who entered the industry early always advised me to self-custody Bitcoin. Later, Coinbase grew larger and began providing custody services for some institutions, and people started to feel that if Coinbase went down, we might face bigger problems, so they turned to Coinbase. Now, products like IBIT may be the next iteration because if BlackRock were to fail, it would almost be too big to fail. I am trying to understand the mindset of those willing to do this.

Transferring Bitcoin to IBIT would be simpler. Investors, especially those managing risk overall, want to do everything on one platform rather than switching between two ecosystems, which complicates things. If you are a holder of iShares, it is worth noting that BlackRock is not your counterparty. You are a shareholder of the fund, and the fund has its own governance structure. Our custody is provided by Coinbase, and we disclose all parts of the ecosystem, but we do carefully select partners to provide Bitcoin for IBIT investors.

Investor Demand for Bitcoin

Jason:

BlackRock recommends a 1% to 2% asset allocation for investors interested in Bitcoin. What considerations underlie this allocation recommendation? This is sure to attract a lot of attention. BlackRock suggests allocating 1% or 2% to Bitcoin. What is the reasoning behind this decision?

Samara Cohen:

First of all, we suggest that investors who want to invest in Bitcoin allocate 1% to 2% of their assets to Bitcoin, which needs to be considered in the context of the entire portfolio.

Looking back at the journey in 2020, we were trying to do two things. First, we were educating existing iShares investors about Bitcoin. Second, we realized we were also educating existing Bitcoin investors about ETPs and their packaging. Therefore, we aimed to achieve both simultaneously. Initially, we focused primarily on spreading knowledge about Bitcoin.

We discussed what Bitcoin is, how ETPs work, and how to acquire Bitcoin. Then we explored more broadly the potential of Bitcoin as a unique diversification asset, especially in the current macroeconomic environment. We reviewed some past market stress events, such as the COVID-19 pandemic and regional banking crises, observing Bitcoin's performance relative to other risk assets. We examined Bitcoin's diversification potential, a narrative that will continue to unfold as we gather more data, including the latest events in the geopolitical market volatility we are currently experiencing.

After studying Bitcoin's role as a potential diversification asset, we wanted to explore the issue of portfolio allocation, but this is indeed challenging when it comes to Bitcoin, as it is with gold. Ultimately, when the value of an asset depends on its level of adoption, this analysis becomes complex.

We believe a key point that external investors can understand, and one that is recognized internally within our company, is the consideration of overall portfolio risk tolerance. Our view is that, given the concentrated investment in "MAG 7" companies within a broad U.S. equity portfolio, investors have already taken on some concentration risk and are coexisting with it. Therefore, we can set up an allocation such that if I am willing to take on the same additional risk contribution in Bitcoin as I would in MAG 7 stocks, this line of thinking is understandable, which has led us to propose a 1% to 2% allocation. If it exceeds 2%, the additional contribution to overall portfolio volatility would increase exponentially. Thus, this is the constructive thinking we find helpful.

Bitcoin Trading During Market Sell-Offs

Jason:

Bitcoin trading has been quite intriguing. We are recording this in mid-April, and the market has been very volatile in recent weeks, clearly indicating that the market is still uncertain about how to trade Bitcoin.

I remember one day when the Nasdaq plummeted, gold surged, and Bitcoin remained stable. We discussed this issue a week or two ago. I feel that Santi's view is that investors are uncertain whether Bitcoin should trade like the Nasdaq or like gold. I saw Bitwise's CIO Matt Hogan say on Twitter that Bitcoin trades differently from both; Bitcoin is Bitcoin, and it is a new asset class. I'm curious about your thoughts.

Samara Cohen:

Bitcoin is indeed a new asset class, and as a borderless store of value, Bitcoin's ultimate state is more akin to gold. However, this is difficult to grasp during the adoption process. I heard you or someone on Roundup mention that Bitcoin is 50% like the Nasdaq and 50% like gold. I think that is exactly what we are seeing.

This is a critical moment to observe how Bitcoin's price performance manifests in this market volatility caused by cross-border tensions and supply chain complexities. Theoretically, this should be Bitcoin's "stage." However, the actual performance has been underwhelming, failing to demonstrate the unique diversification we have seen under other market stresses. Instead, during this event, Bitcoin's correlation with stocks has actually increased.

There are also some additional observations. We have talked about these before, and I would love to hear your thoughts. First, if we look at Bitcoin and IBIT, we find some divergence between the two. IBIT has not experienced the large-scale outflows that Bitcoin has, which may indicate that the market price movements over the past few weeks have been primarily driven by retail investors and speculative trading, while many institutional positions were already closed out in the latter half of March. Of course, IBIT cannot be leveraged like BTC, so we can now see the role of different investor bases, with a greater presence of long-term investors in IBIT.

Another interesting point is Bitcoin's volatility. Bitcoin did not exhibit significant volatility during the downturn, and its volatility still maintains a positive skew.

Volatility is evolving. Bitcoin tends to be more volatile when it rises and relatively mild when it falls. This is usually a good thing. By the way, this is also why IBIT options are so important to the ecosystem, as this characteristic of volatility is typically very favorable for options market makers.

Who is Buying Bitcoin ETPs?

Jason:

We just discussed different types of buyers, with 50% being self-directed and the other 50% purchasing through advisors. Among institutional investors, there is another category of buyers. But there is actually a group of new buyers who are non-emotional buyers. These buyers include market makers or some hedge funds, although they may not be market makers; they just want to make small profits through large-scale trades. What are your thoughts on these new entrants to the market?

Samara Cohen:

I haven't heard him specifically discuss this topic. However, I do believe that among institutional investors, the last segment is neither self-directed nor advisor-guided, but rather institutional investors. While we can see from some documents that sovereign wealth funds, pension funds, and endowments are buying Bitcoin, the majority of buyers in this space are still hedge funds. In many cases, the buying behavior is like this.

I think the non-emotional buyers that David mentioned can be seen as investors or traders (widget buyers) who only purchase specific financial instruments, looking for relative value across different asset classes. One important way they buy Bitcoin is through futures basis trading, which I think is an important dimension in every market.

Is the Launch of Ethereum ETP Successful?

Jason:

The success of Ethereum is clearly not as pronounced. Why is that?

Samara Cohen:

I have become accustomed to the disappointment of the crypto community regarding ETH, but I think it is not quite appropriate to benchmark it against IBIT.

Clearly, for investors, the investment framework for Bitcoin is very clear, such as its role as a store of value. However, understanding the valuation framework for Ethereum or other tokens is much more complex. I have noticed that in the investor community, while there may be optimism about the utility of the Ethereum blockchain, there is uncertainty about how to translate that into actual value accumulation for the tokens. This is one aspect. Additionally, investors are generally concerned about their risk exposure to large tech stocks and feel there is a certain correlation with their investment allocation to Ethereum.

Jason:

What do you think are the main issues facing Ethereum right now? If Bitcoin is digital gold, what is Ethereum's positioning? Is that positioning too complex?

Samara Cohen:

I don't think Ethereum's positioning is more complex than that of other altcoins. In fact, I believe the entire crypto space has issues with data and standardization. How to evaluate these different tokens and applications, understand the sources and destinations of value accumulation, and access analytical information are all very complex. I don't think this is a simple marketing issue.

Investor Demand for Cryptocurrencies

Jason:

What are your thoughts on other crypto products? I know you can't disclose upcoming products, but what new crypto products do you think the market still needs?

Samara Cohen:

Looking back at the development of Bitcoin ETPs, it is first important to clarify its investment logic. Currently, the investment logic for many altcoins is not clear. One challenge in the crypto space is which applications will become winners? Which problems will be solved, and how? We are currently very focused on tokenized money market funds and tokenized government bond funds, as the liquidity of cash and collateral in capital markets is poor, and blockchain technology can clearly improve this issue. As these technologies mature, we will see which protocols, applications, or companies successfully solve real problems, thereby deriving their investment logic. But I believe that we are still in the early stages of technology application and cannot determine who the ultimate winners or losers will be, and investments need to have a clear view on this.

This reminds me of the index question you mentioned. If you are optimistic about technology applications but uncertain about how to choose winners and losers, that is the purpose of index investing. It allows investors to access the entire market or a specific area of the market, defined by an algorithm we call index methodology. So what I want to ask you is, how can this market organizing technology be applied in the crypto space? Because it relies on data and standards.

Jason:

I think data and standards are key. Currently, the industry is focused on the wrong metrics. In our Block Works, we believe the industry is focusing on the wrong metrics. Therefore, the crux of the problem lies in data and standards. If I look at the top 100, 50, or 500 companies in the stock market, although I may not know their specific businesses, they are all real companies with revenue, cash flow, income statements, and governance structures.

Samara Cohen:

The aspects you just mentioned can be used to build index methodology. If you consider factors like governance, teams, cash flow, etc., then I am not sure how many tokens can meet those requirements.

Jason:

I think we need to focus on the fact that if you delve into the leadership meetings at Block Works, this is precisely the question we are constantly pondering, because a core issue in the industry is that among the top 50 tokens on CoinGecko or CoinMarketCap, I have no confidence in 40 of them. I believe there are some opaque operations among market makers. This is completely different from the top 50 companies in the stock market; although I may not know exactly what they are doing, I can see their income statements, governance structures, and know their management teams, which do not exist in the crypto space.

Samara Cohen:

Exactly, this is fundamental for index investing because index investing actually has two steps. The first step is how to build the algorithm and create index methodology to describe the market or different areas of the market. The second step, which is also a challenge, is how to translate that algorithm into an investable portfolio in the real world while minimizing the actual friction associated with investing and rebalancing.

Jason:

Yes, that is the index I would be willing to invest in. For example, it could be the top 50 protocols that can generate actual revenue. But we can discuss this later.

Reasons BlackRock is Bullish on Tokenization

Jason:

We spent about $15 billion to $30 billion acquiring different companies. Cryptocurrencies are clearly an important asset class and industry that you are focused on, as is the private market. Can you tell me how you view the growth of the private market and why it is so interesting? How do data and standards fit into this?

Samara Cohen:

In large-scale operations, data and standards are crucial. Currently, our mission is to expand capital markets to support more people who wish to save and invest, as well as more companies, not just those looking to raise funds for various interesting and exciting investment projects (whether related to AI or infrastructure). We are at a moment where the expansion of capital markets will bring more economic growth.

How to Expand Capital Markets? This almost starts with data and standards. I believe indexing is fundamental, and it will become the foundation for cryptocurrencies and private markets. Even before index investing, we need to understand what performance looks like. What is your benchmark? How do you know if you are outperforming or underperforming the market? You need to define the market.

Based on this mission, we need a larger market to support more investors. We are looking for the next 100 million investors. We have our digital asset strategy and have indeed increased our investments in private markets, including the acquisition of Global Infrastructure Partners and HPS (a private credit management company), although the HPS deal has not yet been completed.

Finally, there are completed acquisitions, and Preqin is very important because Preqin is a data and analytics company. I think our transparency and belief in data and standards are evident. This acquisition trajectory will bring transparency, scale, and ultimately provide more opportunities for a broader market.

Jason:

I saw a CNBC headline mentioning how the world's largest asset management company is reshaping itself with nearly $28 billion in acquisitions. I'm not sure if that figure is entirely accurate. We refer to the $28 billion acquisition as a push to develop private assets. So will you do the same in the crypto space?

Samara Cohen:

I'm not so sure. I think we are still in the early stages of our journey in digital assets. As I mentioned, we are optimistic about the potential of tokenization to improve capital markets and make them work better. Therefore, we are very focused on more tokenization in the market and how we can build bridges with investors. Whether it's bringing more cryptocurrencies into traditional finance through ETPs or the tokenized money market funds we discussed, some of the largest consumers and investors in tokenized money market funds are crypto-native institutions looking for more sophisticated financial management capabilities. Thus, we will continue to invest in building these bridging capabilities.

Regarding cryptocurrencies, or rather, the broadly defined term of cryptocurrencies. If I say digital capital markets, people need to invest in capital markets. I'm very interested in this. At what inflection point do you think more people's investments will shift to on-chain rather than off-chain?

Jason:

At Block Works, we essentially see it as creating a new financial market. You have all these assets in traditional old databases, and we are just moving those assets to a new, potentially more efficient database.

Samara Cohen:

I love that analogy. I think we must focus on this transition process. Because if you and I were to sit together and whiteboard a vision for global capital markets, it would certainly be more tokenized than the current market. But we have a massive functional traditional market. How to get from point A to point B is something we need to spend time thinking about, and I have spent a lot of time considering how these markets can interoperate as much as possible.

How to Achieve Asset Tokenization

Jason:

I think one of the most interesting developments in recent months is your collaboration with IBIT to move Bitcoin, this crypto asset, from the crypto track to the traditional financial track. We haven't talked about BUIDL yet, which involves the process of moving from the traditional track to the crypto track. Ethena seems to be one of the main holders of BUIDL.

I believe there will be a significant trend this year, although it hasn't been fully public yet, it has already started behind the scenes. Stablecoins were initially about putting dollars on-chain, and then we started putting government bonds and money market funds on-chain. Next, I think we will see the emergence of on-chain credit, putting credit on-chain.

Before diving into tokenization, I want to ask you a question about new products. From an institutional perspective, how many crypto assets do you think are currently investable? For example, Bitcoin and Ethereum?

Samara Cohen:

I don't know much about the situation of other coins in the institutional ecosystem. But based on our conversations with institutional investors, they are currently primarily focused on Bitcoin, especially in the current environment. Ethereum is still relatively secondary.

We are talking about those institutional investors who typically sit in a 60/40 bond portfolio, looking for new sources of yield and diversification. They want both, which is why they are investing in private markets and Bitcoin, especially under the current circumstances, along with a range of other more systematic alpha-generating strategies.

Jason:

From a valuation perspective, do you think we will adopt existing company valuation methods? In today's market, we are all looking at the same metrics, such as earnings per share and price-to-earnings ratios, or income statements. Will we apply these metrics to crypto assets? Or do you think we will create new important metrics for crypto assets?

Samara Cohen:

I think it depends on what you are focusing on. I feel that it can be easy to apply income statements to blockchain, but Ethereum may not be applicable. It might be more like a commodity rather than a company. Applications like Uniswap might be easier to apply income statements to because they have revenues and expenses, etc.

I think that makes sense. You and I have had many discussions about digital asset policy and regulatory pathways. I think one complex but exciting thing right now is that much of the existing regulation does not take into account the potential of blockchain technology. It does not really consider all these features like 24/7 trading or atomic settlement, real-time transferability, etc. Therefore, I do believe there will be a new set of standards and metrics that will become part of the true lasting adoption of crypto assets.

Jason:

What are your thoughts on tokenization?

During 2018 and 2019, there was a lot of discussion about "we will tokenize the entire world," and many companies began to take action. The initial proposal was that we would make illiquid assets more liquid through tokenization. We would put all real estate on the blockchain, but ultimately nothing happened because illiquid assets did not become liquid as a result. The new phase now is that we are actually moving relatively liquid assets on-chain, and there is significant demand for this.

Samara Cohen:

You have a great answer to this question. First, it can make the infrastructure for securities trading, derivatives trading, and collateral management more efficient, reliable, and transparent. Therefore, I believe finding technological applications that solve real problems is much better than simply turning illiquid assets into liquid assets.

I love this point, as you said, everyone thinks we can create markets for more assets. This situation often happens with ETFs. I can't tell you how many times I have been approached by a stock exchange in some emerging market country, where they need to do a lot of work to make their local market more investable, create transparency and data, but they seem to have a myth that simply listing an ETF will solve their market modernization issues. But that is not the case. The market needs certain standards to build investor confidence so that buyers and sellers can come together. I think tokenized assets are the same. There is no doubt that if we look at the various parts of the capital market ecosystem, tokenization will improve those parts and unlock value for the ultimate investors.

BlackRock's Ten-Year Vision for Cryptocurrency

Jason:

What do you think of BlackRock's ten-year plan in the digital asset space?

Samara Cohen:

We recently elaborated on this vision in detail, publishing a paper titled "The Power of Capital Markets," and we will also release a letter from the chairman each year to publicly share our views. We believe in capital markets, and by the way, in our paper and thinking, we adopt the broadest definition, which is that capital markets are the intersection between consumers and suppliers of capital.

For suppliers of capital, they are savers who temporarily do not need to use their funds and wish to earn returns through investments, such as equity in companies or bond interest. On the other hand, consumers of capital are companies and governments that wish to use funds immediately for investment to promote growth.

In the current post-crisis era, the funding capacity of banks and governments is constrained, so we need to expand capital markets to drive economic growth. Tokenization can play an important role in this regard, especially in the liquidity and collateral ecosystem, which are key to market operations.

Jason:

When do you think we will see the emergence of tokenized stocks?

Samara Cohen:

I'm not sure. What do you think? I believe that the IPOs of some large crypto companies will be a moment to watch.

Jason:

That would be interesting. I predict that crypto platforms like Coinbase and traditional brokerages like TD Ameritrade, Schwab, and fintech brokerages like Robinhood and public.com will begin to converge. If traditional brokerages do not innovate, they may be eliminated, while platforms like Coinbase may start offering stock trading, and Robinhood will also launch powerful crypto products. This will be the first intersection.

Samara Cohen:

We need to see on-chain investors' demand for broader investment opportunities. This will drive the tokenization of assets like stocks and bonds.

Jason:

In recent years, people in the financial industry have often talked about building permissioned blockchains, like JPMorgan's Quorum. Now, many, including BlackRock, are developing on public blockchains. How do you view the differences between public and private blockchains?

Samara Cohen:

I think future developments may primarily focus on permissioned blockchains because they help meet regulatory requirements and can better control information. I feel our thinking is influenced by the surge of trading venues after the financial crisis. While increasing multilateral trading platforms is a good idea, too many platforms lead to complexity and fragmentation in the system, which is not ideal.

Therefore, leveraging the transparency of public blockchains to avoid these issues, I think this is an important shift. This is not only true for me personally but also for our strategic thinking. How to effectively build institutional-grade financial applications on public blockchains still faces many challenges, but I am optimistic about it.

Jason:

What advice do you have for teams building L1 and L2 and trying to pitch to BlackRock?

Samara Cohen:

I don't think there's a need to specifically pitch to BlackRock. We are doing well in terms of staying connected and self-learning. Therefore, rather than thinking about how to pitch, focus on the significant problems in the market that need to be solved. For me, 24/7 trading and its future is an important topic. It is a fascinating subject that I have been keeping an eye on.

24/7 trading will become a reality. In public markets, we have already seen this trend, especially in the stock market. Part of the reason is the "FOMO" in the crypto market, where many investors have become accustomed to accessing the crypto market anytime and anywhere. Additionally, there are other reasons. There are many different views on the advantages of a 24/7 market. In my opinion, it is very difficult to restart a market that has stopped trading. When a market has continuous liquidity, its resilience makes sense. However, certain time periods carry higher risks. Therefore, how to create a 24/7 market while ensuring transparency, resilience, and safeguards to protect investors is a significant issue that needs to be addressed. This is a real challenge that blockchain technology needs to solve.

Does speculation drive adoption?

Jason:

What are your thoughts on the popularity of memes last year? Will this affect Solana's brand image among institutional investors?

Samara Cohen:

I don't have a specific opinion on that. However, I find the gamification phenomenon in the market interesting. Anything that can attract investors to participate in the market has the potential to be beneficial in the long run. But the key is to have the right safeguards and education, as well as how we view a long-term investable portfolio.

For me, this is appealing. Initially, I thought the focus was on converting more savers into investors. But then I realized there might be an intermediate stage where people first become traders, making them comfortable with the market and willing to participate.

Jason:

The GameStop incident is an example, right? Many people stayed in the market because of it.

Samara Cohen:

It is indeed an interesting case. Memes may have played a role in attracting long-term investors into the crypto space. But I believe that transparency and education, as well as a sense of responsibility across the entire crypto industry, are crucial for sustaining this process rather than letting it stagnate.

Jason:

I hadn't thought of it that way before. These speculative things have almost become a guiding tool that leads people to ultimately become investors.

Samara Cohen:

My children are an example. My son thinks ETFs are boring and not worth investing in. As a parent, I initially thought, "Well, I'll wait until he grows up." But now I hope he can experience the market, albeit within a framework that has safeguards.

Final Thoughts

Jason:

A massive wealth transfer may be about to happen in the future. It is estimated that around $50 to $70 trillion in wealth will be transferred from the older generation to the younger generation. If you look at some surveys, you'll find that about 90% of young people aged 15 to 20 are disappointed with the traditional financial system. What are your thoughts on this massive wealth transfer, especially regarding young people's dissatisfaction with the financial system?

Samara Cohen:

There is also a statistic indicating that about two-thirds of that 90% may be women, which means there will be a significant change in the structure of investors and market participants. We know that this generation is a digital native when it comes to investing, typically obtaining investment advice through peers and social media. So how do we prepare for this and help them succeed? I think this is a great example of how important collaboration is between crypto companies that are digital natives and traditional financial companies at this critical moment. We need to think about what constitutes an appropriate portfolio, how to attract investors, how to create solutions, and how to market, as the significance of branding becomes increasingly important.

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