Coinbase is exploring crypto ETF and has sought help from BlackRock

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Coinbase CEO Brian Armstrong.
Anthony Harvey / Stringer

Coinbase, the cryptocurrency exchange operator, is looking into getting a crypto exchange-traded fund off the ground, and it has sought help from the $6 trillion asset manager BlackRock.

Coinbase is known for its wide-ranging business model, covering asset management, venture capital, trading, custody, and brokerage. It’s now looking to create an exchange-traded product tied to crypto, according to people familiar with the matter, as a way to allow retail investors to gain access to the volatile crypto markets.

Coinbase in recent weeks has held conversations with people from BlackRock’s blockchain working group to tap into the firm’s expertise at launching exchange-traded products, the people said. BlackRock, an early pioneer of the ETF market, is well known for its iShares division.

BlackRock’s blockchain working group, which was started in 2015, consists of employees across its numerous businesses, and its goal is to identify applications of blockchain-related technologies in financial services, according to a person with knowledge of the group.

It remains unclear whether the talks were a one-off or part of ongoing conversations between Coinbase and BlackRock. BlackRock representatives from the working group didn’t give any concrete recommendations to the crypto exchange operator, the person said.

To be sure, BlackRock confirmed it had no interest in being a crypto fund issuer. And its CEO, Larry Fink, has said the firm’s clients have expressed zero interest in the $300 billion market for digital currencies, referring to bitcoin as an “index of money laundering.”

If Coinbase were to develop a crypto ETF, it would join numerous other firms looking to launch their own, including the rival Gemini, Bitwise Asset Management, and VanEck.

Coinbase announced in March an index fund of cryptocurrencies aimed at accredited investors. The ETF would also most likely track numerous cryptos, not just bitcoin, according to a person familiar with Coinbase’s plans. A bitcoin ETF has been viewed as a natural next step in its maturation as an asset and could precipitate the entrance of more retail investors into the crypto market.

But the idea of a bitcoin ETF has received pushback from regulators that don’t think markets for cryptos are properly monitored. Recently, the Securities and Exchange Commission rejected a slew of nine fund proposals by numerous asset managers.

Still, Coinbase’s conversations with BlackRock marks the latest example of the crypto world’s growing appeal among traditional Wall Street circles.

Goldman Sachs is developing a custody product for crypto, which would mean the bank holds cryptocurrency and, potentially, keeps track of price changes on behalf of large fund clients.

Fidelity and JPMorgan are reportedly also looking into custody. And ICE, the parent company of the New York Stock Exchange, in August announced Bakkt, a platform for cryptocurrency trading.