BlackRock Talks Tokenization on Call
BlackRock (BLK) reported its Q2'26 earnings yesterday, but talked very little about cash and money markets. (See the call transcript here.) CFO Martin Small says, "Cash net outflows of $7 billion in the quarter were due to redemptions from U.S. government funds, partially offset by the creation of bespoke liquidity solutions. Our customization capabilities and scale are driving sustained growth in cash management, with AUM up 10% from a year ago. We see the road to 2030 and beyond as presenting one of the largest expansions in capital markets growth and participation in history. The forces of demographics, growing retirement needs, generational wealth transfer, structural deficits, rapid innovation cycles." During the Q&A, the company was asked about tokenization. Small replies, "We see the operating environment in digital assets becoming more and more constructive; our strategy remains client led. We already have about $110 billion in AUM connected to digital assets. As part of our 2030 plan, we're aiming to make this a $500 million revenue business at BlackRock.... We have three things we're doing and tracking milestones against each. The first is to bridge traditional finance world and the decentralized finance markets. We're doing that through our digital assets products, IBIT, Ether, BUIDL. They all invest in digital native products and are the largest in their categories. They're driving meaningful growth in the traditional capital markets and bridging digital and traditional finance. Second, we want to be the stablecoin reserve manager of choice in the industry. We already manage $60 billion of reserves for Circle, representing about a quarter of the $300 billion stablecoin market. We see lots of growth ahead in stablecoin, and we want to be the reserve manager of choice. The third, and I think the most exciting for us, is tokenizing long-term investment products like Treasury funds, iShares ETFs, and even private markets in the long term." He explains, "To that end, two actions we've taken: We've recently filed two registration statements with the SEC for tokenized money market funds. One is a tokenized share class on Ethereum of an existing fund, and the other is a more digitally native strategy with additional features like daily dividend reinvestment and the like. We expect it to be accessible through multiple chains and to operate in an ecosystem where third parties support stablecoin-enabled subscription and redemptions so that the funding mechanism can happen all on-chain in the digital wallet. As stablecoins and digital wallets grow, clients will need high-quality reserve and liquidity products that can operate natively in that digital ecosystem. These filings that we've made recently are about bringing BlackRock's core cash management capabilities to where digital assets clients are already operating. They reinforce our broader ambition to help connect traditional capital markets and tokenized assets." Small comments, "The thing I'd observe is that there's 5 billion digital wallets in the world. When we talk about tokenized assets, tokenized assets are the spear tip into an entirely new distribution channel. Accessing an entire new class of investor, it's a pure organic growth opportunity for BlackRock. We have a whole scaled ecosystem of products that could, over time, be tokenized. When I think about $2 trillion-plus of crypto and digital wallets, when I think about another $300 billion of stablecoins all growing, these are all potential new investors with iShares. They're all potential new users of model portfolios, SMAs, and managed accounts in tokenized format. We want to build a digital wallet native asset manager. We're working with market participants, regulators in a way to do that creates growth and resiliency and brings more investors into the markets and more organic growth at BlackRock."
