As the world’s largest asset managers expand their crypto reach, their main rivals have been resisting entry into the market up to now.
BlackRock has added a layer of reliability to Crypto for its investor segment, taking into account its $11.5 trillion assets management. Ishares Bitcoin Trust (IBIT), the fastest growing ETF of all time, managed nearly $69 billion as of Wednesday.
But Vanguard, who has around $10 trillion in managed assets, hasn’t been bitten, despite its major competitors continuing to seek more entry points.
Vanguard was not one of the companies lined up to launch its first US Spot Bitcoin ETF in January 2024. When these ETFs began trading, the company told BlockWorks that it could not be purchased on Vanguard’s Brokerage platform.
About six months later, Vanguard blocked trading of ETFs that also held Ether.
read more: “Difficult to justify” limiting access to growing Bitcoin ETFs
In both cases, the representative told Blockworks that the Crypto ETF “is not focused on (providing) as a (providing) as an asset class, such as equities, bonds, and cash, and that Vanguard views it as a component of a balanced long-term investment portfolio.
They added: “We will continue to evaluate brokerages (provided) and evaluate new product entries into the market.”
A Vanguard spokesperson told Blockworks at an Exchange ETF meeting in March that the company’s views on Crypto had not changed. Company representatives did not reply to further comment on Blockworks’ latest requests.
Vanguard’s rivals gather in the code
Many traditional financial giants’ executives have historically been more widely wary of Bitcoin and the crypto space.
Vanguard founder John Bogle told People in 2017, “Stop Bitcoin like the plague.” BlackRock CEO Larry Fink once called Bitcoin the “money laundering index.”
Fink’s view evolved as demand grew, with BlackRock’s leaders labeling Bitcoin (after launching IBIT) as an “asset class that protects you” from economic uncertainty and geopolitical risks. Bogle had no such stance change, at least publicly, before his death in 2019.
Fink has also been ruled out about the benefits of blockchain technology, pointing out in a March letter to shareholders that tokenizing all stocks, bonds and funds would “revolutionize” investments.
Samara Cohen, CIO of BlackRock’s ETF and Index Investments, told Blockworks co-founder Jason Yanowitz last month that the company’s executives have been “a longtime Crypto student.”
She added: “What we heard from our clients in 2020 and 2021 was really changing because we had a few years ago that we actually thought this had a potential role in a diversified portfolio.”
BlackRock launched a private Bitcoin Trust in 2022 and debuted Bitcoin ETF within two years. Earlier this year, the model portfolio focused on the company’s alternatives began assigning IBITs between 1% and 2% of their assets.
Ric Edelman, founder of Edelman Financial Engines and founder of the Digital Assets Council of Financial Professionals, said Vanguard clearly did not move on data showing historic benefits (risk-adjusted returns) of adding a single-digit percentage to Bitcoin.
“If you fundamentally believe in modern portfolio theory, if you believe in diversification and portfolio rebalance, include both volatile and non-correlated assets,” he said. “Bitcoin is the perfect example of non-volatile, non-correlated assets.”
BlackRock is not the only financial Titan looking to capitalize on the demands of crypto investors.
State Street Global Advisors was the third largest fund manager in 1993 and the issuer of the US ETFs’ first US ETF, bullish against a diversified and actively managed crypto portfolio. The company launched several such funds last year through a partnership with Galaxy Digital.
Fidelity formed a digital asset unit in 2018 and owns a Bitcoin ETF with assets of approximately $20 billion under its management. Franklin Templeton also has a BTC ETF. He also participates in tokenized money market fund games, like BlackRock.
Charles Schwab has not ruled out the Bitcoin Fund offering. In the meantime, broker Titan has expressed interest in allowing investors to buy and sell crypto ETFs on its platform and offering spot crypto trading when regulatory clarity comes.
Morgan Stanley is also reportedly considering adding crypto transactions to its e*trade platform, although a spokesman declined to comment.
read more: As Wall St. persists, spots to “commoditize” crypto transactions
Wells Fargo is a company with no concrete, public cryptographic plans and recognizes Crypto as a viable asset class. Last year, the bank made unsolicited spot Bitcoin ETF purchases available to certain clients, and in a March report called digital assets “investable as they continue to evolve.”
Even Jamie Dimon, CEO of JPMorgan Chase, who has been criticizing Bitcoin for years, said on Monday that bank clients can buy Bitcoin. He compared Bitcoin to smoking.
These comments came days before BTC reached a new all-time high of over $111,000.
Outside of Bitcoin, Bank of America’s Brian Moynihan said in February at the Washington, DC Economic Club that the company would enter the Stablecoin business if a US lawmaker grants regulatory approval. The 2030 estimate for a basic case for City Analysts of the magnitude of Stablecoin Market was $1.6 trillion, roughly seven times the current $230 million.
Vanguard’s choice is “befuddling” for some people
Edelman argued that Vanguard’s decision to “draw a line in the sand” on crypto products was “bufddling” and that it had no meaning to the business.
“Vanguard is in the troubling position of acting as stepmothers who determine children’s behavior, as opposed to business partners who promote their clients’ ability to invest as they choose,” he told Blockworks.
Bloomberg Intelligence Analyst Eric Balknath (author of The Bogle Effect) said Vanguard has eschewed the Wall Street scandal over the years and has probably built more trust than other financial services companies.
However, he argued that Crypto ETF’s decision to block trading on the platform was “targeted with the nanny.”
“In this case, it feels like they’re trying too hard to be trustworthy people for responsible Boy Scouts,” Balknath told me. “I don’t think they need to do that. I think what I might be more trustworthy is to trust your investors and make decisions.”
Bitise Cio Matt Hougan said Vanguard’s irony was on both sides of the financial innovation curve.
The mainstream asset management industry scattered when Vanguard introduced index funds in the 1970s and called such passive vehicles “non-American” and “Bogle’s Folly.” Balchunas’ book on Bogle records how Vanguard partially transformed the financial industry by reducing fund costs.
Meanwhile, Bogle was skeptical of the ETF as it built a dominant franchise by Ishares and State Street Global Advisors. The company has since established itself as a low-cost leader in the category. The Vanguard S&P 500 ETF (VOO) is the world’s largest ETF, with an AUM of approximately $660 billion.
“So they know what it’s like to dismiss innovation and make mistakes happen,” Hogan said. “Even so, here they’re back with the code.”
Beyond Vanguard’s statements over the past 16 months or so, and beyond the statement to Blockworks, January 2024 Q&A executives Janelle Jackson and Andrew Kadisky have provided a little more colour to their thinking.
In a post entitled “No Vanguard Bitcoin ETF? Why is it here?” Kadjeski said Vanguard removed leverage and access to reverse funds on its intermediary platform in 2019.
He states: “These products are often misunderstood and misused by investors, allowing them to increase their losses.”
Hougan pointed out that many platforms actually created gates or education requirements first, making it difficult to buy leveraged funds. But that’s not the best analogy, he told BlockWorks. It said it considers compounding effects (and returns, especially in the long term) as it can be difficult to understand such products.
“But Bitcoin ETFs are one of the simplest ETFs in the world,” said Bitise CIO. “It holds Bitcoin. That’s it. There’s no confusion.”
Hougan added: “There are good cases to help investors understand the ETF they have purchased. But I think the platform is making a big mistake when telling investors whether or not the ETF should own it.”
Will they move?
Vanguard’s leadership is one reason why some believe that they will ultimately choose to jump into the Crypto game. CEO Salim Ramji was leading the ETF business at BlackRock, preparing to launch IBIT.
read more: Yes, Vanguard’s new CEO has supported BlackRock’s Bitcoin ETF launch
Ramji told ETF.com in August that the company would not launch a Crypto ETF. “I’m not going to copy any of our competitors,” he added. “It’s important that companies keep in line with who they are.”
However, positions may change, industry watchers maintain.
“When he joined, I think he wanted to rock the boat very quickly,” Balknath said of Ramji.
Edelman said he was “very confident” and that Vanguard would “reverse the position of policy” by the end of the decade. They will eventually list these on the platform and provide their own cryptographic ETFs.
“They will obviously be recognized as my players,” he said. “No one who already owns a crypto ETF will move on to theirs unless they provide a compelling reason.”
Providing low-cost funding could be a way for them to gain market share, Edelman acknowledged.
Advice and wealth management business vanguard, teased in December, could spur the movement on the crypto front, Bulknas argued.
“Even if they don’t belong to the Vanguard ETF, I think over time they’ll get more requests from people who want Crypto as part of their portfolio,” he said. “Are they going to continue to deny that? I think the desire to grow the advisory business will ultimately make them cave into a brokerage platform.”
Edelman believes consumer demand will encourage pioneers to provide their own crypto funds, but Bulknath is not too sure about that.
The company declined to launch its own gold ETF, citing its view that it would focus on stocks, bonds and cash. Still, you can trade gold ETFs such as BlackRock and SSGA on the platform.
