BlackRock CEO Annual Letter to Investors: Bitcoin may challenge the global status of the US dollar, tokenization is the financial highway of the future

Author: Weilin, PANews

On March 31, Larry Fink, CEO of BlackRock, one of the world 's largest asset management companies, released a 27-page annual letter to investors . In this letter, Fink's tone rarely warns: If the United States cannot control its inflated debt and fiscal deficits, the dollar's "status as a global reserve currency" that it has been relying on for decades may eventually give way to emerging digital assets such as Bitcoin.

Bitcoin may weaken the dollar reserve currency status

Fink raises a thoughtful question on page 20 of this report: “Will Bitcoin weaken the dollar’s ​​reserve currency status?”

He said the United States has benefited from the dollar's position as a global reserve currency for decades. But this status is not always guaranteed. Since the "Treasury Bond Clock" in Times Square began to be timed in 1989, U.S. Treasury bonds have grown three times that of GDP. This year, interest expenses alone will exceed $952 billion, exceeding defense spending. By 2030, mandatory government spending and debt services will swallow up all federal revenues and create a long-term deficit.

Publicly held federal debt as a percentage of GDP

While warning about traditional financial risks, Fink also made it clear that he is not opposed to the development of digital assets. Link wrote: It should be noted that I obviously do not object to digital assets. But two things can be true at the same time: Decentralized finance is an extraordinary innovation. It makes the market faster, lower cost and more transparent. However, it is this innovation that could also undermine the U.S. economic advantage if investors start to think Bitcoin is safer than the dollar.

When reviewing performance, Fink pointed out that BlackRock's Bitcoin ETF launched in the United States became the first release of the largest exchange-traded product in history, with asset management exceeding US$50 billion in less than a year. IBIT is the third-ranked product in the entire ETF industry, second only to the S&P 500 Index Fund. More than half of the demand comes from retail investors, and three-quarters come from investors who have never held iShares products before. This year, BlackRock has expanded its bitcoin products to exchange-traded products (ETPs) in Canada and Europe.

Fink further pointed out that ETFs have not only achieved great success in the United States, but are also becoming a key tool to promote the development of European investment culture. He said that many European investors entering the capital market for the first time took the first step through ETFs, especially iShares products. At present, only one-third of individual European investors participate in capital market investment, which is far lower than the United States'. Not only did this make them miss out on the growth opportunities offered by the capital market, but their savings account earnings are often eroded by inflation in the context of low interest rates.

To increase this proportion, BlackRock is working with many mature European institutions and emerging platforms, such as Monzo, N26, Revolut, Scalable Capital and Trade Republic, to jointly lower investment thresholds and improve local financial literacy.

Sing the RWA and bluntly say that tokenization is the "highway" of the

future of finance

Extending from ETFs to the popular encryption technology at present, Fink believes that tokenization is becoming a key force in reshaping financial infrastructure.

Link wrote that the circulation of global funds today still depends on the "financial pipeline" established in the trading hall when people shouted orders and fax machines were also regarded as revolutionary tools. Take the Global Banking Association of Financial Telecommunications (SWIFT) as an example - it supports trillions of dollars in global transactions every day, and it operates more like a relay race: banks pass instructions in turn, carefully checking the details at each step. In the 1970s, when the market size was small and the trading frequency was low, this relay method was reasonable. But today, continuing to rely on SWIFT is as inefficient as sending emails to the post office for forwarding.

Although this system was reasonable in the past, its efficiency today is no longer able to support global and digital financial needs.

In Fink's view, the emergence of tokenization will completely change this inefficiency. If SWIFT is a postal service, then tokenization is the email itself—the assets can be circulated directly and in real time, bypassing all intermediaries.

Fink further describes how tokenization can profoundly change the financial ecosystem, which is undoubtedly a disguised optimism for the RWA market. "It is to convert real-world assets (such as stocks, bonds, real estate) into digital tokens that can be traded online. Each token represents your ownership of a specific asset, like a digital proof of ownership. Unlike traditional paper certificates, these tokens are securely present on the blockchain, making buying, selling and transfer instantly without the need for cumbersome documents and waiting time. Every stock, every bond, every fund, every asset can be tokenized. Once implemented, it will revolutionize the way of investment. The market will no longer need to close, and transactions that originally took several days to complete can be settled in seconds. The hundreds of billions of dollars of funds that have been frozen due to settlement delays will be able to be reinjected into the economy immediately and drive more growth."

Perhaps most importantly, he said that tokenization will make investment more "democratic". Tokenization can achieve democratization of access. Tokenization allows asset holdings in fragmented form – assets can be divided into countless small portions. This means that assets with high thresholds (such as private real estate, private equity) will be open to a wider investor group, greatly reducing the threshold for participation.

Tokenization can also democratize shareholder voting. Owning stocks means you have the right to vote on the company's shareholder proposals. Tokenization makes voting easier because your ownership and voting rights are recorded digitally, allowing you to participate in voting safely and without barriers from anywhere.

Tokenization can also achieve democratization of returns. Some investments have much higher returns than others, but often only large investors can participate. One of the reasons is the existence of "friction" such as law, operation, bureaucracy and other "friction". Tokenization can strip these barriers and allow more people to gain opportunities to enter high-yield fields.

However, Fink also frankly pointed out that the popularity of tokenization still faces a key technical and regulatory challenge. “One day in the future, I believe that tokenized funds will become the daily allocation of investors like ETFs – but only if we have to overcome a key issue: identity verification.”

He said financial transactions require strict identity authentication. Apple Pay and credit cards can complete billions of identity verifications every day without barriers. Trading platforms such as the New York Stock Exchange (NYSE), MarketAxess can also do it when buying and selling securities. But tokenized assets will no longer go through these traditional channels, so we need a brand new digital authentication system.

"It sounds complicated, but India, the world's most populous country, has achieved this goal. Today, more than 90% of Indians can complete transaction verification with a smartphone."

In this annual letter, Fink also reviewed the historical development of the capital market, pointing out its important role in promoting social prosperity and helping individuals accumulate wealth through investment. He said that financial innovation is still needed to bridge the gap between public and private equity markets, and emphasized the importance of expanding investment opportunities, especially allowing small and medium-sized investors to participate in asset classes that were originally only open to the richest people.

Although he also acknowledges the current prevalence of economic anxiety, Fink still tries to appease investors, saying that such periods are not new - as historically, relying on human resilience and the power of capital markets, the economy will eventually return to stability.

In general, Larry Fink's annual letter to investors warns of the risks of the dollar's global reserve status and is also a prediction about the future of finance. From tokenization to reconstructing the capital market to the required bottleneck breakthroughs in the digital identity system, Fink reveals the unreasonableness of the existing system and points out the new directions that technological and institutional innovations may bring.