BlackRock's Crypto Strategy With Samara Cohen

I think that we are really early in our digital assets journey. And as I said, I think we are really bullish on the potential for tokenization to improve access to capital markets and make them work better. We will continue to invest in our capabilities to build those bridges. And how you get from point A to point B is, uh, something we need to spend time on. What is the turning point where more people's investments go on-chain than off-chain?

Hey everyone, Jason Yanowitz here. I'm excited to announce that today's sponsor, Petra, a top non-custodial wallet developed by Aptos Labs, just launched Earn, a new feature to access DeFi with just one click. Earn lets non-US users deposit USDT directly into Aries markets, lending pools, and manage it all directly from the Petra wallet. This is not financial advice. Participating in DeFi does carry risks. To learn more, visit petra.app/earn. I wanted to take a moment to tell you about Focal by FalconX, the AI-powered insights engine built for institutional crypto. By leveraging AI, Focal empowers institutional investors to streamline research, anticipate market shifts, and make sharper investment decisions. You'll hear more about Focal later in the show. Hey guys, Jason Yanowitz here. Just to let you know, we have Permissionless 4 coming up in June from the 24th to the 26th at Industry City in Brooklyn. This is a conference for the developers and builders where we'll be focusing on the DeFi Renaissance, applications, token design, and much more. Click the link in the show notes to grab your ticket today and use code EMPIRE10 for 10% off.

All right, everyone, welcome back to Empire. Very excited about this. Very, very excited about this conversation. I think it's two verys. I usually don't read people's bios at the beginning of episodes.

Oh my gosh, please don't read my bio.

And I don't— I think I'll get this one right. I created it myself, but I— it's possibly the most impressive bio we've had on Empire. So I actually do feel compelled to read it. So we've got Samar Cohen. Samar is the Chief Investment Officer of ETF and Index Investments at BlackRock, the CIO of BlackRock, BlackRock's ETF business. What does that mean? Manages the market quality and investment integrity of roughly $7.8 trillion of BlackRock's index funds and iShares ETFs. Before BlackRock, Samara was the managing director in the securities division of Goldman Sachs. Also, I'm just going to keep going with this. Samara, Samara was named one of American Banker's Most Powerful Women in Finance. She's been honored as one of Barron's Most Influential Women in U.S. Finance for the past 4 consecutive years. She's on the board of SIFMA. She's also on the board of BlackRock's Foundation. And also my favorite is you studied theater in college. So.

Well, thank you for including that, Jason Yanowitz.

It's important as a history major. And my co-founder Mike was a classics major.

I love that.

You got to get the theater major in there. Absolutely. Is that the right bio?

Yeah, that was pretty good. I'm, I'm psyched to be here.

So I would like to know what your role actually is and what you actually do and how you think about your role at BlackRock, including maybe some numbers would be helpful, like how big is your team? How many assets? Was the $7.8 trillion number correct? I'd love— I'd like to hear how you think about your role.

So I actually think the most important number, if you're going to take away one number in terms of my role, are the number of investors around the world. Who are accessing the markets through iShares ETFs and BlackRock index portfolios. And that's over 100 million investors. And our aspiration is to reach the next 100 million investors in the hopes— and we write about this all the time, we've written about it recently around the importance of capital markets to fueling people's retirements and financial well-being. The more people who can participate in markets, the more people who can participate in economic growth around the world. And ETFs and indexing have been really a disruptive technology over the past 50 years that allow more people to participate in markets. So what I do at BlackRock is I oversee how we do that, how we take indexes and turn them into investable portfolios. And then a step beyond that, of our assets, about half are in other types of fund wrappers that are index portfolios and half are ETFs. So ETFs, many ETFs take index portfolios and put them in the ETF wrapper, although increasingly ETFs are used for things besides index investments too.

How do you think about the, the role that BlackRock plays in the world and what you guys are really doing here?

So I actually have almost an OG seat to that. It really depends on who you ask how long I've been at BlackRock. But BlackRock was actually, and I don't think, despite the fact that you insisted on reading my bio, I don't think you got this one piece of trivia, which is that BlackRock was my very first job out of college.

1993, right?

Yes. Thank you. That was not necessary to put in your podcast, but thank you, Jason, for dating me because I actually left the date off my bio.

Well, I do think it is important if we're talking about ETFs as this, as a technology, technology because people don't really think of ETFs— people don't realize ETFs at one point in time were this controversial technology.

Yeah, that's right.

And now they've penetrated all of capital markets.

And by the way, index investing was too. Index investing actually— and actually something that I think you might enjoy and your listeners might enjoy too that dropped a few weeks ago on YouTube is a pretty cool movie called Tune Out the Noise about the history of index investing. And interestingly, index investing didn't really come of age until there were commercial microchips available because it took so much compute power to simultaneously buy thousands of securities into a portfolio. But actually, when I say I was OG, almost OG BlackRock, BlackRock didn't have an ETF and index business then. I was graduating as a dual degree, a finance major and a theater major, but all of my summer experience from college was working for regional theater companies. But I wanted to see what I could do with my finance major and I was captivated by this firm, uh, which at the time I was recruiting was called Blackstone Financial Management, that said they were on a mission to bring better risk management technology to investors in the mortgage-backed securities market, which was really BlackRock's expertise then. Now, I didn't really know what a lot of that meant, but I loved the mission of helping elevate the ability of more everyday investors to manage risk, and so I ended up going to work for this company BlackRock, I was employee number 134. We now have over 20,000 employees, I think 23,000 employees, but I was employee number 134. And despite the fact that we are more than 20,000 employees, you know, later, now we manage in markets around the world and across asset classes. I still think that basic premise of that story around bringing better technology to allow investors to manage their risk and access markets is as true today for what we try to do as a firm as it was then.

Can you tell me the difference between ETFs and ETPs and how you, how BlackRock's business has basically evolved? Because when I think when the general public thinks about BlackRock, they think of BlackRock as the largest maybe distributor of ETPs or ETFs. I'm not even sure the right acronym to use there. But it's— I actually didn't realize you guys didn't start with that. So I'd love to hear just the development since, you know, in the years that you've been there and how we should even talk about BlackRock as a business.

So let's work in reverse order. First, let's start with definitions. ETP is the uber category, exchange-traded product. ETF is a subcategory of that. It's an exchange-traded fund. The industry conflates them all the time. I really appreciate that you asked me the question, particularly because I didn't set that question up with you. But we think increasingly, since there is so much more being put into the ETP wrapper, it's actually quite helpful to separate the two. Technically, IBIT would be an ETP or even an ETC, not as broadly an industry accepted term in the US, exchange traded commodity, but it's not a fund and it's not a diversified index fund or an actively managed portfolio. And so it's helpful, but really they are used interchangeably. ETF is used, most in the industry, but technically ETP is more of the uber category. BlackRock was founded in 1988. Actually, BlackRock bought Barclays Global Investors, BGI, in 2009, and that was the, uh, that was when iShares became part of BlackRock, and BlackRock really leaned into the ETF and index business, which at the time was like Actually kind of controversial and surprising for the industry who didn't really have their heads around the fact that active and index could live together in one place.

Yeah, that's interesting. So if you— you're on the— I'm blanking on the name— the Global Executive Committee, I think, for BlackRock. How do you all think about the business and like almost the P&L? Like, tell me about the different business lines of BlackRock and how you think about the business as a whole. And really, it's under the context of me trying to think about, you know, we'll start to get into crypto and Bitcoin. Yeah. And so I'm trying to almost envision where crypto and Bitcoin fits into the whole P&L of BlackRock.

Sure. And this has been a journey for me, I would say, in terms of being— I mean, look, I've been on BlackRock's Global Executive Committee just for 3 years, but I came back to BlackRock 10 years ago, almost 10 years ago exactly, after being at Goldman Sachs for 16 years. So I can tell you something that was extremely different in coming— being at an asset manager and being at BlackRock specifically after being, you know, part of the trading business at Goldman is that we are very mission-driven. Our mission is to help, you know, people invest better, to help more and more people experience financial well-being. But we also really every 5 years take a long-term view around what our North Star is as a firm. We write about it. We spend a lot of time internally with employees so everybody really understands where we're going. So as you've seen some of that play out over the last few years, where do we think we need to be in the future to help more and more people experience financial well-being? Well-being. We know we have to be bigger in private markets, which explains 3 of the, you know, transformational deals that we announced over the last year: Precuin GIP and the one that is yet to close, that's HPS, our work in digital assets tokenization and with iBit. And more broadly, how we're thinking about retirement and retirement portfolios in the new you know, macroeconomic regime that we are today.

Yeah. Um, what do you think of the macroeconomic regime? I don't know if you're, uh, I don't know how much markets talk you can, you can do, or that, uh, yeah, that you're like, I guess, allowed to do. But, uh, what do you think of the market regime today? I mean, it's completely flipped on its head.

I mean, yes, you and I, you and I have, uh, have gotten to know each other over the past years, and, uh, uh, our past year in particular. And, um, it has been, uh, an extraordinary market, although I will say as a 30-year markets professional, I can point to multiple moments over the course of my career where I have said this is an extraordinary market environment. I've had more of those moments over the past 5 years, I think, than I had had in the, you know, maybe 15 years before that.

So it does feel like the market is getting crazier. That's not just, you know, someone who has less market experience than you.

I think the past few years have You know, starting with COVID introduced more unpredictability. And I have been thinking a lot about what that means for a market in terms of resilience, adaptability, and repositioning as information changes quickly and, you know, and is digested. And actually, some of the ETF story that we have seen. I think that the growth in ETFs and demand for ETFs has in part been fueled by that because ETFs are really easy and convenient ways to access a market. So for example, you and I are having this conversation, you know, a couple of weeks after the initial announcement of tariffs, and we have seen record days of ETF trading volumes in both equity ETFs and fixed income ETFs. So just, You know, for example, the percentage of the US equity tape that is ETF trading is usually pretty positively correlated with the VIX.

Mm-hmm.

And probably before April 2nd was around 27 or 28%. And in the past 2 weeks has spiked on certain days to 40%. Because if you want to very quickly reposition your risk, ETFs are a transparent and easy way to do that. And so I think the ETF story is very entwined with the how do you create more access and agility in a market as things are quickly moving.

Hey everyone. Earlier in today's episode, I mentioned Petra, a top non-custodial wallet developed by Aptos Labs. They just launched Earn, a new feature to access DeFi with just one click. Earn lets non-US users deposit USDT directly into Aries Markets lending pools to gain interest and rewards and manage it all directly from the Petra wallet. Petra Earn was designed to make DeFi more accessible for everyone. You can manage your balance, claim rewards, and deposit directly from the app. This is, of course, not financial advice. Participating in DeFi carries risks. To learn more, visit petra.app/earn or by hitting the link in the description of today's episode. I wanted to take a moment to tell you about today's sponsor, ZenRock, the permissionless decentralized custody network backed by 1Roundtable partners, 10T, Maven11, and Spartan. Now available on Jupyter, ROCK is the native token for transactions within the ZenRock ecosystem and secures ZenRock's decentralized custody network. The first application launching on ZenRock is ZenBTC, yield-bearing Bitcoin on Solana. ZenBTC will be live in April 2025. To find out more, you can follow ZenRock on X or click the link in the show notes.

Okay, so let's say that we're going into this kind of like, I guess broadly could be described as like high volatility era of the markets potentially. I don't know if you'd agree with that. ETFs now make— I don't know if I'll get these stats right either, but ETFs I think now make up over 50% of the like fund complex, I think you could call it, and somewhere between 13 to 20% of equity markets. Those are the numbers that I roughly found. Um, the— I think traditional wisdom might say in a high volatility era you want maybe more active strategies, active managers, and in a less volatile, you know, eco regime you might want more passive or index. Um, how do you, how do you think about like the role that ETFs play in a higher volatility? And I know I'd be curious to get your husband's— I know your husband works on the active side as well, so I don't know if you guys have these debates over the dinner table.

Totally. So there's a lot to unpack in those questions. And I do say this is such a nerdy thing for an index investor to say, but I do like to talk about Adam and I as like an alpha-beta couple where I'm the index portfolio manager and he is the alpha-seeking active manager. But really, at the end of the day, Jason, there is A, nothing passive about managing an ETF or index portfolio, and B, probably even more important than A, nothing passive about an investor's decision to use an ETF or an allocation to an index strategy as part of their investment process. And I think that's really important. And going back to this trajectory that BlackRock has been on, since its 2009 acquisition of BGI, it was really that active and index is a spectrum for an investment, you know, for an investor to construct a portfolio and determine when do they want kind of core beta building blocks, when do they have single security, high conviction, and bringing those two things together in the post-COVID period, Actually, some of the biggest institutional uptake we saw of ETFs were institutional asset managers like BlackRock using ETFs for allocations in their portfolio strategies, particularly in fixed income ETFs. So one thing to say with respect to your stats, which I think are broadly correct for the amount of the equity market that is in the ETP or ETF wrapper right now, much lower in bonds. So bonds is about 1 to 2% of the, you know, fixed income market is in the ETP wrapper. And of course, for those of us who watch it closely, Bitcoin is more like 5%, kind of in between equities and bonds.

Okay, so maybe moving into Bitcoin. So I'm assuming the conversation had been had here way before 2024 about should we launch a Bitcoin product? Was it more of a regulatory a regulatory-driven decision where you said, okay, now that from a regulatory perspective, this is finally here, or was it an investor demand-driven decision, or was it a market structure decision where you said, okay, the exchanges are buttoned up enough, the transparency is in the market, there's no wash trading. What drove the decision?

It was all three of those things, but it really did start with the investment thesis and client demand. So it went investment thesis, client demand to market structure and readiness. To obviously the regulatory backdrop and what we could do. And it was, and pretty much always is in that order. And hopefully that's the trajectory for regulation too, that the market structure needs to be there for, for, you know, regulation to be there and those things inform each other. One note is that our first Bitcoin product actually wasn't the ETP. So we did launch a private trust in 2022, which was really important as much as I would say we had been, we, you know, launched a digital assets team in, you know, 2016-ish and had done a lot of work, particularly around applications of blockchain technology to different parts of the investment process. We had done a lot of work and we had been students of crypto for years. We didn't get hands-on to actual Bitcoin until we launched that institutional product in 2022. And that's that was a very important institutional moment for us to just get comfortable with the workflows and the risk management and the systems. And that positioned us in terms of our technology inside our four walls to then support the, the ETP, which, as you said, we, we launched and filed in '24. But we really— so by '22, we had heard from enough clients that A, they did want access to Bitcoin and B, they were kind of dissatisfied with the current suite of, of alternatives they had. To access Bitcoin and they were building out their investment thesis around it. And that was pretty profoundly different by then than it had been even 5 years earlier. Yeah. And then, you know, to your point with respect to ETPs, you could have the best technology and trading capabilities in the world, but it takes a markets ecosystem to make an ETP work. And in the case of a Bitcoin ETP, it was really like a fascinating exercise in not just assessing crypto market structure, but assessing the key points of interoperability because the Bitcoin ETP was kind of the ultimate bridge to take this thing on crypto rails and put it on ETP rails. And then I guess the last thing I'll say, which is a little bit— because I know it's been a bit of a long-winded answer, but it was a long journey. Initially, when we were approached around the Bitcoin ETP, and this is definitely true for me personally, and I would consider myself you know, a student of crypto and digital assets, it was surprising to me that people in crypto thought it was so important. It almost seemed like the ETP is a— like we talked about, it's a disruptive technology. So is crypto. It's an organizing construct to help people access markets more easily. It struck me that Bitcoin on its own, the first time I bought some Bitcoin just personally to understand how the ecosystem worked, it took me inside of 2 minutes to do it on my phone. So it was— I had to get my head around what that value prop— like, it almost seemed like the ETP wrapper would deprecate the promise of Bitcoin market structure. But then you learn the reality of crypto market structure is that there's actually a lot in tradfi that is additive. And that's where we saw the demand for ETPs.

Yeah. When did you buy your first Bitcoin?

Not soon enough, Jason Yanowitz.

What is— what— how does a decision like that get made at a firm that's as large as BlackRock? And maybe there's— because I've seen maybe 3 ways that decisions like this get made at big, at big organizations. There's top-down, the CEO, right? Someone like Larry is like, we're doing this. There's very bottoms-up. So there's maybe the salespeople are hearing from clients and that trickles all the way to the top. And then maybe there's the third way, which is someone on the executive team has extreme buy-in and says, we have to do something with crypto. Let me just run with it. What did it look like actually at BlackRock?

Look, I think at our best, all three of those things are true. And our crypto journey has played out pretty publicly.

Yeah.

In terms of the— and I think that's, that's kind of the nature of the firm. We are students of the market and we may evolve in our thinking on something. And what we heard from clients in that, you know, again, 2020, '21 was really changing from what it had been a few years before in thinking that this actually has a potential role in a diversified portfolio and why. And recall also, I mean, for me, it's always easy to remember how old Bitcoin is because my daughter Eileen was born on October 10th, 2008. So, you know, 3 weeks before the white paper and a couple of years before the first transaction. But this is a pretty young asset class in terms of actually even assessing what its role should be in an asset asset allocation strategies. So I think for us, we need, you know, we had top-down fascination with the market and with all things that can improve how we serve our clients. We started to get more and more bottoms-up interest from our clients. And then it is really important that you have internal champions who educate and engage and are patient. And I would put our head of digital assets, That's Robbie Mitchnick solidly in that category.

He's done an incredible job.

He really has.

Yeah. Tell me why you think— so undoubtedly, I mean, it's one of the most successful ETP launches in the history of ETPs.

The most, actually.

The most. The most. Why was it the most successful launch in the history of ETPs?

So one of the things I learned, and I learned so much about so much more about the utility of the ETP wrapper and the utility about the utility of bridge building between crypto and tradfi. But one of the key learnings in '24 was how much demand there was for the ETP wrapper from the crypto native community. So broadly speaking, about half of iBits holders right now are what we call self-directed investors. The other half is split between also retail, but advised retail. So it acts a little bit more—

So like a financial advisor or an RIA.

That's right.

Okay. So 50% are, I've got a TD Ameritrade account or a Charles Schwab account and I'm just clicking buy on my account.

50%. Okay. Yep. And then call it, you know, the other 50% is, is half advised. And half institutional. So of the self-directed investor, that first 50%, our data really suggests that 3/4 of that investor base had never held an iShares. We can tell that they had never held an iShares ETP before. So even though we have, I mean, it's po— I can't see other ETPs, so it's possible they held a different ETP, but since iShares is the leader in the category, I think it's pretty fair to say that for 3/4 of that population, they set up a brokerage account in some cases and bought their first ETP because they wanted their Bitcoin in the ETP wrapper. Probably because they— That's very interesting. Yeah, they wanted the kind of institutional-grade custody. They wanted the transparency of trading. And, you know, maybe they aren't living their life on crypto rails and thought it was annoying to, you know, move in and out of their, you know, there might be this idea of like too big to fail.

You know, a lot of my friends who were, you know, maybe got into the industry fairly early, very self-custody of Bitcoin. It was always self-custody of your Bitcoin. You have to self-custody your Bitcoin. Then Coinbase gets bigger. Coinbase starts custodying some institutions. It's like, okay, you know what, maybe it's fine because if Coinbase goes down, we've got bigger problems on our hands. So then it's moving to Coinbase and now maybe something like iBit is the next iteration of that where it's like, like if BlackRock fails, it's too big. It's almost too big to fail. So I don't know. I'm trying to get inside the mind of someone because I didn't do that. So I'm trying to get inside of the mindset of someone who would do that.

You didn't move all your Bitcoin into iBit?

I didn't move my Bitcoin into iBit. Yeah, but maybe by the end of this podcast.

Maybe we'll still be friends.

Yeah, maybe by the end of this podcast. Why would someone move their Bitcoin into iBit? Because it's safer?

I think because probably one of the number one reasons we heard is that it's just easier. Investors like to, especially investors who are looking at their whole portfolios and managing their kind of risk in a holistic way, it's like complicated to try to do it across two different ecosystems. It's just easier to do it all in one place. And I will make the point, if you're a holder of iShares, you're it's not like BlackRock is your counterparty, to be clear. Like, you are a shareholder in the fund and there's a governance structure around that fund. And yes, our custody is provided by Coinbase and we kind of disclose all of the parts of the ecosystem. But we do curate who we engage with in the ecosystem to deliver Bitcoin to IBITS investors.

Hey everyone, earlier in today's episode I mentioned Petra, a top non-custodial wallet developed by Aptos Labs. They just launched Earn, a new feature to access DeFi with just one click. Earn lets non-US users deposit USDT directly into Aries Markets lending pools to gain interest and rewards and manage it all directly from the Petra wallet. Petra Earn was designed to make DeFi more accessible for everyone. You can manage your balance, claim rewards, and deposit directly from the app. This is, of course, not financial advice. Participating in DeFi carries risks.

To learn more, visit Petra.app/earn or by hitting the link in the description of today's episode.

I wanted to take a moment to tell you about today's sponsor, ZenRock, the permissionless decentralized custody network backed by one roundtable partners, 10 Maven 11, and Spartan. Now available on Jupyter, ROCK is the native token for transactions within the ZenRock ecosystem and secures ZenRock's decentralized custody network. The first application launching on ZenRock is ZenBTC, yield-bearing Bitcoin on Solana. ZenBTC will be live in April 2025. To find out more, you can follow ZenRock on X or click the link in the show notes.

I remember I was reading this piece and you all recommended, and I think I saw maybe Robbie might have presented on this. BlackRock recommended a 1 to 2% allocation for investors interested in investing in Bitcoin. Where did this allocation decision come from? Because that's a big, that's a big— you must have known that was going to be a big headline. BlackRock recommends allocating 1% or 2% to Bitcoin. What went into this decision?

Well, first of all, you said it. Correctly, we recommended for investors who wanted to make an allocation to Bitcoin that 1 to 2% was a reasonable way to look at it in the context of a whole portfolio. Now, just to go back a little bit on the journey of 2024 and what we tried to do, because we knew we were doing two things. Number one, we were educating existing iShares investors on Bitcoin. And number two, as we realized, we were educating existing Bitcoin investors on ETPs and on the ETP wrapper.

Yeah.

So we wanted to do those two things at the same time. So we started really mostly by educating on just Bitcoin. What is Bitcoin? How do ETPs work? How does Access work? Then we wrote more broadly about the potential diversification about Bitcoin as a unique diversifier in today's macro environment. And we looked at a bunch of past stressed market episodes, whether it was COVID, whether it was the kind of regional banking crisis, to look at how Bitcoin was performing versus other risk assets. And we talked about the potential for diversification. And that is a story that will continue to play out as we get more data, including from the most, you know, recent episode of geopolitical market volatility that we're in. And then after having done that work, Bitcoin overall, Bitcoin potentially as a diversifier, we wanted to tackle this question around portfolio allocations. And it is difficult to do this in Bitcoin, also difficult to do this in gold ultimately when the value of the asset is a function of its adoption. So what we thought might resonate with investors externally that resonated with investors inside the firm was to think about tolerance to contribution to overall portfolio risk and to make the case that investors at the time, given concentration in, you know, broad U.S. equity portfolios to the Mag Seven, had taken on some concentration, had taken on that concentration risk and were living with it. And so therefore, maybe, you know, rooting the allocation, saying, okay, if I'm comfortable taking up to the same incremental risk contribution in my Bitcoin as I am in a Mag 7 stock, that's something that I can get my head around. And that got us to this 1 to 2% allocation. If you go beyond 2%, the incremental contribution to overall portfolio volatility gets exponentially higher. So that was the, the construct that, um, we thought was helpful.

Interesting. How do you— so it's been really interesting seeing how Bitcoin trades. So we're recording this mid-April and just the last couple of weeks with Liberation Day. And I mean, the market's been very volatile in the markets. Obviously, the— it is, it is becoming clear that the market doesn't know how to trade Bitcoin. I think, you know, it was— there's one day where the Nasdaq was really down, gold was really up, and Bitcoin was flat, which we talked about this on the Roundup a week or two ago. But I think Santin, my take was that it's clear that investors don't know if Bitcoin should trade like Nasdaq or if it should trade like gold. And I think I saw Matt Hogan, the CIO of Bitwise, saying on Twitter, he's like, it doesn't trade like Ether. Bitcoin trades like Bitcoin. It's a new asset class. I'm curious to get your take on that.

Yeah, so I think that's fair. Bitcoin definitely is a new asset class. I think the hope, or at least the potential for Bitcoin to be this borderless store of value, is that it does ultimately look more like gold, but how to think about that during the adoption trajectory is the tricky part. And I've heard you or somebody on the Roundup kind of say it's like 50% Nasdaq, 50% gold. And I think that's a bit what we're seeing, but this is an important moment to play out in terms of how Bitcoin's price performance does show up. I mean, this environment of market volatility that is really induced by cross-border tension and, you know, supply chain complexity. Like, this should be Bitcoin's environment. And so the price performance has actually been pretty disappointing, and it definitely has not delivered that unique diversification that, you know, we saw from it in some of those other stressed market episodes. If anything, in this particular one, Bitcoin's correlation with equities has increased from where it was before. There's a couple additional observations. And look, you and I've talked about this. I'd love your, your thoughts here as well. But number one is that Bitcoin, it's pretty interesting actually, if we look at what's been happening in Bitcoin and also what's been happening in iBit, where we see a little bit of a divergence in that IBIT actually hasn't had the level of outflows you would almost associate with the price performance that we saw in Bitcoin, which might suggest— and we can prove out that a lot of the market, the price action in the past couple of weeks was retail and speculatively led with a lot of institutional positions being kind of flattened at in the second half of March. And of course, you can't lever iBit in the same way you can lever BTC. So you could actually see these different investor bases playing out right now. And you kind of see the, you know, more of the long-term investor base in iBit. The other thing is that certainly Bitcoin's vol of vol has been interesting to observe. Like Bitcoin hasn't had the volatility in the downtrend. It continues to have this kind of positive skewiness to it its volatility.

Interesting. What does vol of vol mean?

I mean that Bitcoin's, Bitcoin tends to melt up more than it melts down.

Ah, yes. We like that about Bitcoin.

Yes, that is generally a good thing. And by the way, it is why this options on iBit were so important to the ecosystem because that is generally a great thing for an options market making business, that kind of characteristic of volatility.

We talked about different buyers, right? 50% of the buyers were self-directed. The other 50% is kind of advised in the institutional crowd. There is a group of buyers that— so Dave Kalk, also an ex-Goldman person, was on the podcast.

Former swap trader from Goldman Sachs.

There you go. Yeah, yeah. Was on the podcast a couple of weeks ago talking about there's actually a new group of buyers and they are the non-emotional buyers. They're the market makers. They're the hedge funds who are maybe not the market makers, but the hedge funds who are just trying to clip very small BIPs and do that in size. How do you think about this new group of folks who are in the market?

So I haven't heard him talk about that. I do think that there is this— the institutional— so that last piece, not self-directed, not advised wealth, but rather institutional. While there have been some notable, we can see from the filings, like sovereign wealth, pension and endowment buying. Most of that category is still hedge funds. And in that case, a lot of it is, I wonder whether what David is talking about is the non-emotional buyer. I kind of think of as the widget buyer. Like they look across asset classes for relative value. A big part of their Bitcoin buying was in futures basis trades.

Yes, yes.

And so I think that that is, is a, uh, uh, an important dimension of, um, of like every market.

Yeah. Uh, okay, so, so IBOAT, the most successful ETF in the history of, uh, or excuse me, most successful ETP in the history of ETPs. Uh, Ethereum, less successful. Why was that?

It always— I'm very used to, uh, um, the crypto community, uh, disappointment in, in ETH, but I do have to say Like, iBit is the wrong benchmark.

Yeah, yeah. We're benchmarking against the most successful in the industry, obviously. Yeah, yeah.

I think for investors, the framing around Bitcoin and their interest in Bitcoin is quite specific to its potential diversification properties, you know, store of value. Understanding how to create a valuation framework for Ethereum or, you know, any other token gets more complicated. And I think one of the things we've seen in the investor community is You might be really bullish on the, you know, utility of the public Ethereum blockchain, but not know how that translates into value accrual to the native token. So I think that's one dimension. And another is that I think largely investors have felt relatively exposed to mega-cap tech and felt a correlation to that with any potential incremental allocation to ETH.

Do you think that there's a story problem for Ethereum right now? If Bitcoin is digital gold, what's the story of Ethereum? And is it too complex of a story right now?

I don't think that the Ethereum story is any more complex than, frankly, any of the altcoins. I think that crypto does broadly have a data and standards problem. In terms of like how do you start to look at these different tokens and applications and understand where value accrual is and is going and where do you get the information to, to do that analysis. So I think that is really complex. I don't think that it's a marketing problem.

Yeah, I'm going to clip that and use that as like a— that's our ad for Blockworks research and data platform.

You're welcome.

Yeah, that's our ad. What do you think of other— so I want to get back to that in a second, the standards and data, because it's really interesting and the valuations as well. What do you think about other crypto products? Not, not, not that you guys— I know you can't share anything that you, that you all will launch, but just what other new crypto products does the market— do you think the market wants?

So if we go back to the conversation we had on, you know, Bitcoin ETFs and, and the journey it, you know, starts with the investment thesis. And I think it is really unclear what the investment thesis is with respect to like a very broad array of altcoins right now, because I think one of the issues in crypto is generally like, what are the— like, where are the winner apps going to be? What problems are actually going to get solved and how. So right now, a space that we pay really close attention to because we can see the problem it's solving is tokenized money funds and tokenized treasury funds, because the movement of cash and collateral in the capital markets ecosystem is very suboptimal and can clearly be improved by blockchain technology. So as that starts to play out and as we start to kind of see what protocols, what applications, what companies succeed and are solving real problems, I think we can work backwards into the investment thesis for them. But I still think we're kind of early innings in figuring out like who are the winners and losers in terms of the adoption trajectory for the technology overall. And you kind of need a view on that to invest in it. Now that gets me back to— and don't worry, I'm going to bring us back to data and standards— your question around an index, because there should be an answer in there somewhere. If you are bullish on the application of the technology, but not sure how to pick the winners and losers, like, that's actually why index investing was born. It was born to give people access to an entire market or a sector of a market as defined by the algorithm that we call index methodology.

Right.

So I guess my question for you is, how do you do that? And I know that there are experts in indexing in crypto and I look forward to getting to know them. But still, like, how do you do that? If I think about indexing fundamentally as an organizing technology for a market. How do you perform that task in crypto right now? Does— because foundational to it is data and standards.

Yeah, I think the data and standards, it comes— I think so the industry is kind of looking at the wrong metrics right now in our— at Blockworks, like in our view, the industry is looking at the wrong metrics. So I think it does come down to the data and standards. It also comes down to if I look at the top 100 companies or 50 companies or 500 companies in the equities market, I look at them and I might not know fully what they're doing, but they're real companies, right? They've got revenue, they've got cash flow, they've got a P&L that I can build and I can understand it. They've got governance and a team.

We could write index methodology, by the way, with those 5 things that you just named.

Yeah.

Right? If you say governance, a team, you know, cash flow, like, then all of a sudden, like, I don't know how many coins meet that, then we potentially, yeah.

So that's, I think, what needs, we are like, that's, if you, you know, go inside like the leadership meetings at Blockworks, like that is what we're thinking about. Thinking nonstop about because one of the core problems with the industry, I think, is if you look at the top 50 on something like CoinGecko or CoinMarketCap, I don't believe in 40 of the 50 of those. I think there are games being played with market makers. I think there are very— yeah, just lack of transparency into those coins. It's very different than the top 50 on CoinMarketCap would be very different than the top 50 in the equities market. I may not know what they're actually building, but I, I can see a P&L and I can see the governance and I know who the leadership team is. You don't have the same in crypto.

So that's right. And so that is foundational to index investing because of course there's, there's kind of two steps with index investing. Number one, there's the how do you build the algorithms and create the index methodology to describe the market, organize the market or different sectors of the market. Then part two, which is non-trivial, is how you take that algorithm and turn it into a real-world investable portfolio and minimize all the real-world friction that goes along with, you know, investing and rebalancing, um, etc.

Yeah, that's an index I would buy, by the way. That's a pro— an ETP I would buy. Something with the top 50, probably like, uh, protocols that generate like real REV or something like that. But we can talk about that after the podcast.

Noted.

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Let's talk about— let's talk about data and standards a little bit more. What do you think that— so you all have spent— I think it was somewhere between $15 and $30 billion acquiring different companies. Maybe we can actually talk about the private markets. So when we, when we went on our walk, we, you know, we talked about crypto obviously is one one big asset class and industry that you all are focused on. Private markets are another one. Uh, can you tell me just how you all think about like the growth of the private markets, why that's so interesting? And then Data and Standards kind of slots into there because there's the, uh, the Prequin acquisition obviously fits into that.

Look, Data and Standards slots into doing anything at scale, and right now we're on a mission to expand capital markets so that they can support more people who want to, you know, save and invest, and also more companies, and not just public companies, who want to consume capital for all of the kind of incredibly interesting and exciting investment projects that are there in the world right now, whether they're AI-related or infrastructure-related. Like, we're kind of at a moment where Expansion of capital markets will deliver more economic growth. How do you expand capital markets? Pretty much starts with, you know, data and standards. And I think indexing is pretty foundational. It will be foundational to crypto. It will be foundational to private markets, if only to describe even before, even upstream of index investing, like What does performance look like? What's your benchmark? How do you know if you're outperforming or underperforming the market? Like, you need to define the market. So with that as the stated mission, like, we need bigger markets to support more investors. We're looking for the next 100 million investors. We have our digital asset strategy, which we've talked about, and we've also really increased our bet on private markets with our acquisition of Global Infrastructure Partners. HPS, which, you know, hasn't closed yet.

HPS is the private credit manager?

That's right.

Okay.

That's right. And then lastly, what has closed and is really important to tying all of this together is Prequin, because Prequin is a, you know, data and analytics firm. And so I think our transparency and our conviction around data and standards is pretty clear just from that, the trajectory of acquisitions like that is how you will bring transparency, scale, and ultimately more, more access to, to a broader set of, of markets than, you know, we have.

Uh, if you total up those 3 acquisitions, it was— I saw a CNBC headline that says how the world's largest asset manager is using nearly $28 billion of acquisitions to reinvent itself. Um, I don't know if that number's fully accurate, but $28 billion, let's call it $28 billion of acquisitions. And that's for the private assets. That's to help BlackRock push into the private assets and, and pre- with Bitcoin. Will you do the same in crypto with M&A?

I mean, I have no idea. I think that we are really early in our digital assets journey. And as I said, I think we are really bullish on the potential for tokenization to improve access to capital markets. Markets and make them work better. So we are like very much focused on the path to more tokenization in markets.

More tokenization.

We are very focused on the utility of bridges to investors. So whether that is an ETP that kind of brings more access to crypto to, you know, onto tradfi rails, or whether it is like like, like we talked about tokenized money fund, some of the biggest consumers and investors in tokenized money funds are crypto-native institutions that want more sophisticated, you know, treasury management capabilities. So we will continue to invest in our capabilities to, to build those bridges. I think this question around crypto as a, or crypto is, it's such such a, you know, broadly defined term. Like if I say, you know, digitalized capital markets, right? Like people need to be invested in capital markets. But I, and I look, I'm curious your thoughts on that. Like what is the turning point where more people's investments go on-chain than off-chain?

Yeah. I mean, we, I think at Blockworks, we basically just see this as we're creating a new financial market here and you've got all these assets in traditional kind of old databases and we're just moving assets into a new, maybe more efficient database.

Yeah. And I love that analogy. I think attention must be paid to the transition. Mm-hmm. Because look, I could stipulate if you and I were sitting together and coming up with a vision for global capital markets from a whiteboard, it would be, you know, much more tokenized than, you know, markets are today. But we have have huge functioning legacy markets and how you get from point A to point B, um, is, uh, something we need to spend time on.

Yeah.

And, and that's, I spend a lot of my time thinking about that and how these markets can be as interoperable as possible.

Yeah.

For a long period of time as well.

I mean, I think one of the most interesting developments of the last couple months is, so what you all did with iBit is take take a crypto thing with Bitcoin, something that was historically on crypto rails and then move it into traditional rails. There's also the— we haven't even talked about Biddle at all, but that's something that's going from traditional rails onto crypto rails. I think Athena is one of the largest holders of Biddle. I just saw Sky.

Yeah, the bridge goes both ways.

Yeah, it goes both ways. That's very exciting. Yeah, that's very— and then, I mean, the big— I think so one of the big trends that will happen this year that hasn't I think is starting to happen behind the scenes and will become more public is, you know, so stablecoins started with just basically putting dollars on chain. Then we started putting treasuries on chain and these money market funds. The next thing is on-chain credit, I think, and starting to move credit on chain. So anyways, we'll see what happens there. Before we go too deep into tokenization, I have a question for you on going back to new products. How many assets How many crypto assets do you actually think are investible right now from an institutional lens? Bitcoin and Ethereum?

I'm not a deep enough student of kind of the institutional ecosystems in the other coins right now, but in terms of the conversations that we've had with institutional investors They are really largely focused on Bitcoin right now, particularly in this environment. Ethereum is still a distant second.

So distant second.

Yeah.

So we're not even talking about revenue generating protocols or anything like that.

And remember, we're talking about, you know, the, you know, institutional investors who are, you know, broadly in 60/40 equity bond portfolios and looking to figure out what the new sources of return and diversification will be for them. They want both of those. And that's what's bringing them to private markets. It's bringing them to Bitcoin specifically right now.

Yeah.

And then a whole host of other kind of more systematic alpha-generating strategies.

Yeah. Do you, from a valuation perspective, do you think that we'll try— so there are these typical ways to value a company, company in today's market.

And it's nice because we all look at the same metrics.

It's like earnings per share and P/E ratio and, you know, you can create a P&L and like, we all look at the same metrics, right? EBITDA, things like that. Are we going to use those metrics and apply them to crypto assets? Or do you think that we'll create new metrics that matter for crypto assets? I don't know if you have a take on this.

What's your take?

I think we'll— I think we'll— some— it depends what you're looking at. So I I think it's really easy to just like slap a P&L on a blockchain. I don't think something like Ethereum, you can put a P&L on it. I think it probably looks a little more like a commodity, a little less like a company. Something like an application, maybe Uniswap, that they're— I think something like Uniswap is a lot easier to put something like a P&L on it because it's an application that has revenue and expenses and things like that.

I think that makes sense. I mean, look, another conversation you and I have had a lot is the the path forward of kind of policy and regulation with respect to digital assets. And I think one of the things that is so complicated but also exciting right now is that a lot of existing regulation just doesn't contemplate what blockchain technology makes possible, right? It doesn't really contemplate like 24/7 trading or atomic settlement, you know, real-time transferability, like all of those things. And so I do think that there is a kind of new set of, you know, standards as well as metrics that are going to be a part of real durable adoption of crypto.

How would you describe the value prop of tokenization? What, what be in— okay, the context is, so for folks who are around in maybe 2018, 2019, uh, there was a lot of talk about we're going to tokenize the world, we're going to tokenize everything. And you had these firms that maybe started to move. Uh, the original pitch was we're going to take illiquid assets and make them more liquid by tokenizing them.

So we put all this real estate on the blockchain and guess what happened?

Nothing happened. No, no buyers came because illiquid assets were now liquid. Now the new version, Phase 2, we're trying again at this, is we're actually taking pretty liquid assets and just moving them on-chain. And there's actually a lot of demand for that. Yeah. So I'm curious how you see tokenization.

Okay. So I think you gave a great answer to that question. It is first and foremost, can make plumbing for securities transactions, derivative transactions, collateralization, much more efficient, much more resilient, much more transparent. And so I think looking for real-world problems to solve with the application of the technology to existing infrastructure is a much better place to start than the, let me turn an illiquid thing liquid. Now, one of the things I love about that, and I think you're exactly right, everybody kind of thought, "Oh, well, we can create markets for so many more things." And same exact thing happens all the time with ETFs. I cannot tell you the number of times I might get approached by a stock exchange in an emerging market country who has a lot of work to do to make their local markets more investible. To create, you know, transparency and data and trading in their local markets. But somehow they have this mythology that all they need to do is list ETFs and that will like relieve them of the obligation to actually try to modernize their markets. And it doesn't work like that. You need certain standards in a market to create investor confidence, to bring buyers and sellers together to meet. And I think it's exactly the same thing. With respect to tokenized assets. But there is no question if we look at how various different parts of the capital markets ecosystem work, they will be improved and value will be unlocked for end investors with tokenization.

How do you think about BlackRock's 10-year vision when it comes to digital assets?

Our 10-year vision, which we've, you know, written about a fair amount recently, we wrote both a paper called The Power of Capital Markets, and then every year we put out a Chairman's Letter. So, you know, we're pretty public on that. It is— we believe that capital markets, which by the way, we should define capital markets because one of the things I realized as we wrote this paper, we were all working with different definitions of capital markets. And so in our paper and in our thinking, we take the broadest definition possible. Which is capital markets are the ways in which consumers and suppliers of capital meet. So of course, a supplier of capital is a saver, is somebody who has money and they don't need it today, and they're willing to put it to productive use for some kind of return, whether that return is a share in the future profits of a company or an IOU in the form of, you know, interest in a bond. Like, those are the suppliers of capital. And of course, the consumers of capital are companies who want, and countries and governments who want to spend today and invest, and in doing so create growth. So that's how we define capital markets. And in the kind of, call it, era that we're in today, right? So the post-crisis era where banks can't do as much lending as they did in the past, governments have deficits and can't spend as much as they spent in the past, what that means in order to fuel economic growth, we need bigger capital markets. So the meeting place to bring together, you know, consumers and suppliers of capital, it needs to expand. Tokenization will definitely play a role in the expansion of capital markets, probably by addressing the places where there's the most need. And one of those places right now, I do think, is in the liquidity collateral ecosystem, which kind of makes all of it run.

Yeah, I agree. Um, when do you think that we will see tokenized stocks?

I have no idea. When do you think we'll see tokenized stocks? Like, I think with some of, you know, some of the big, um, IPOs of, of, you know, crypto firms, that would be an interesting—

Yeah, I think that, I think that'll be interesting. I mean, I think the first thing that will really happen is you've got the crypto platforms over here, like Coinbase and Kraken, and then you've You've got the traditional brokerages like the TD Ameritrades and Schwabs of the world, and then you've got the fintechs, fintech brokerages like the Robinhoods and Public.coms of the world. Those will all, I think, I think the legacy brokerages might eventually go away if they don't innovate, but Coinbase will definitely offer equities at some point in time. And then the fintechs like the Robinhoods will definitely all offer a robust crypto offering. So I think those will start, that'll be the first convergence.

And I think, look, I think also you need to see real demand from on-chain investors for a broader set of investment opportunities. That is what will drive tokenization of stocks, bonds, and everything else.

Yeah. All right. I have some crypto-native questions for you that I don't know if you've thought about too much, but so a few years ago, if you asked folks who worked in TradFi about using blockchain, the classic response was very like permissioned blockchains. We're going to build maybe a fork. We're going to fork Ethereum. This is what maybe JPMorgan did. They forked Ethereum, built, I think it's called Quorum, kind of a private permission blockchain. Now, a lot of folks, including, I think BlackRock is leading the way, are building on public blockchains. I'm curious how you all have, you or your team or BlackRock as a whole, has thought about this idea of public versus private blockchains.

So I definitely would put myself in the category of, you know, when we first started looking at this, thinking that the path forward would largely be permissioned blockchains, just given, you know, first of all, the need to satisfy regulatory requirements and also just kind of desire for, you know, control over information. And I think where we got to was in part really informed by the, you know, post-crisis experience of trading venue proliferation. And as much as it was a great idea to create these more all-to-all multilateral trading platforms, the proliferation of them did ultimately create complexity and fragmentation, which was not systemically optimal. So the idea around actually having the— avoiding that pitfall with more the transparency of public blockchains, I think was a pretty important pivot. That's definitely true for me and how I think about it, as well as for us strategically. There's still a lot of things I think that have to be solved in terms of how you build effectively on public blockchains for like institutional-grade financial applications. But I'm optimistic.

Any advice for folks who are building L1s and L2s and trying to go walk into BlackRock and pitch you all on deploying on them?

No, I don't think that— I mean, I think we do a pretty good job of staying close and educating ourselves. So I think better than thinking about how to pitch to BlackRock would be to think about what are the big big problems in the market right now that need to be solved. For me, one of those big problems is 24/7 trading and where that's going. This is fascinating, and I've watched this unfold over my whole career. 24/7 trading is going to happen, I think, in public markets. We see it happening, or 24/5 or whatever gets close to it in public equities. Part of why I think it's happening is actually crypto FOMO. You have all of these investors who are getting used to knowing that like they can access crypto markets any time of day. And so, and there's other reasons for it as well. And I think there's a lot of different views on the benefits of 24/7 markets. I can say in my view, it's really hard to restart markets that have stopped trading. And there is something to be said for market resilience when you have continuous liquidity formation. That said, there are times of day that are much higher risk. And so the big problem I think to solve is how do you create 24/7 markets with transparency, resilience, guardrails to do both things, like create that access but still some level of investor protection, that's a real problem for blockchain technology to solve.

Do you have a thought on the meme coin trend of last year and whether or not it hurts Solana's brand with the institutional crowd?

I don't have a specific thought on, on, on, on that. I do think that this question around gamification in markets is just an interesting one to look at. I don't know, like anything that brings in, gets investors interested in participating in a market, that might be an okay thing long term. But figuring out again, what are the right guardrails, what's the right education and where do we think about investable long-term portfolios. Like for me, I'm fascinated. I used to think the whole story was taking more savers and turning them into investors. I'm starting to think that maybe there's a midpoint stop where somebody becomes a trader first. It gets them comfortable with markets and engaging with the space.

We saw that with GameStop, right? A lot of those people stayed in the market.

That's a really interesting story. Right. So maybe there's a role that meme coins can play in doing that for long-term investors in crypto. Crypto. But I think transparency and education around what they are doing and what the risks are and really the crypto industry coming together and owning that is really important for it to be a journey and not an endgame.

Yeah, that's a— I hadn't thought about it. It's almost like these more speculative things become the onboarding tool that then converts people into becoming investors.

Yeah, look, I'm the mother of teen kids and I can tell you my My son doesn't think ETFs are fun enough to look at from an investing perspective. And so I think as a parent, I initially was like, "Okay, well then wait till you're old enough." But now I think I want him to experience the markets, but I want him to do it with some sort of guardrails around it.

Yeah. Just in the last few minutes that we have, maybe we can talk about your kids. And not them specifically, but there's a massive wealth transfer that's about to happen. Happen. There's a, this huge generation of wealth. I think it's somewhere in the range of $50 to $70 trillion that will pass from the hands of the kind of older generation to the young. Uh, 90— if you look at different surveys, roughly 90% of— I don't know how old exactly your kids are, but roughly 90% of folks—

16 and 18. Okay, perfect. They've got some time, kids, don't get excited.

90% of folks, of kids who are, you know, between the age of 15 and are disillusioned with the traditional financial system. What do you— I don't even know the specific question to ask here, but what do you make of this massive transfer of wealth into a generation where 90% of them are disillusioned with the financial system?

By the way, Jason, I think another stat is that two-thirds of that 90% are actually probably female, which is also a huge change in the demographics of investors and participants in markets. Markets. And we know that that generation of investing is digital native, consumes investment advice often from their peers and their social media networks. And so, how do you, you know, how do you position for that and how do you set them up for success? I think that's actually a pretty great example. Example of why at this moment it's so important that you actually have partnerships between crypto, you know, digital native firms and trad fi firms in terms of thinking of like, what is the right portfolio? How do you engage the investor? How do you create the, you know, the solutions? And how do you sell it? Like, what are our brands? Because ultimately, I think becomes increasingly important.

Agreed. Agreed. Maybe as a closing question here, I should have prepped you with this question so you maybe had some time to think about it, but I'll throw it to you on the fly. If you think about your personal legacy at BlackRock and just in your career, I'm curious how you think about what you want that to be.

Well, I can relate this back to, you know, talking about my kids who are teens now and who were pretty much babies when I came to BlackRock in the first couple of years after the financial crisis. I want my legacy to be someone who helped make markets more transparent and more resilient and more accessible to more people. Like, I mean, I can kind of end where we started. I was a theater major who showed up at a firm feeling like I didn't belong, and I was super intimidated. But on the other hand, I was fascinated by markets, and I loved the story of bringing risk management technology to more people. So if my legacy can be helping more people believe that the markets belong to them and have the confidence then to go and, um, participate, uh, that, uh, that would make me incredibly proud.

Yeah, that's a good legacy. Samara, thank you.

Thanks for having me, Jason Yanowitz.