Bankless - BlackRock's Crypto Plans for 2025 | CIO Samara Cohen

Episode Date: January 20, 2025

In this episode of Bankless, Samara Cohen, BlackRock's Chief Investment Officer of ETFs and Index Investments, discusses how ETFs and blockchain are revolutionizing finance. We explore Bitcoin and Ether ETFs as bridges between crypto and TradFi, blockchain's role in market modernization, and how ETFs enhance transparency and diversification. Cohen also shares insights on upcoming regulations and the importance of education in driving crypto adoption. ------ 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24  https://bankless.cc/spotify-premium  ------ BANKLESS SPONSOR TOOLS: 🪙 FRAX | SELF SUFFICIENT DeFi https://bankless.cc/Frax  🦄UNISWAP | BUG BOUNTY PROGRAM https://bankless.cc/Uniswap-Bug-Bounty  ⚖️ ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum    🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle  🌐 CELO | BUILD TOGETHER AND PROSPER https://bankless.cc/Celo  🎮RONIN | THE FUTURE OF WEB3 GAMING https://bankless.cc/Ronin  ------ ✨ Mint the episode on Zora ✨ https://zora.co/collect/base:0x4be6cd4d402fed49eb2de95fbc8e737e8ffd3e7f/18?referrer=0x077Fe9e96Aa9b20Bd36F1C6290f54F8717C5674E  ------ TIMESTAMPS 00:00:00 Intro 00:06:59 Role of Market Modernizer 00:09:12 Blockchains and ETFs Future 00:12:54 "Blackrock" Blockchain? 00:16:09 ETF Progress Check 00:19:22 Bitcoin & Ether ETFs Updates 00:24:08 Blackrock on Cryptos/ETPs 00:27:47 Blackrock's Research Audience 00:29:26 2025 ETF Predictions 00:33:21 Blackrock's Effect on Options 00:36:06 Options Unlock Opportunities 00:40:28 "Price is Best Marketing" 00:42:42 Upgrading ETF Protocols 00:44:49 Blackrock’s Other ETFs Plan 00:54:11 New Administration Impact 00:58:11 Blackrock's 2025 Outlook 01:00:30 Digital Assets & ETF Teams 01:03:33 Samara's Next Guest 01:05:55 Samara on 2025 Excitement 01:09:02 Closing & Disclaimers ------ RESOURCES Samara Cohen https://www.linkedin.com/in/samara-epstein-cohen-9a661b76/  Black Rock Research Paper https://www.blackrock.com/institutions/en-us/strategies/diversified-strategies   ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures ⁠ 

One of the misperceptions on the crypto side is that ether ETFs weren't as successful as the Bitcoin ETFs. We're really, by all accounts in the ETF world, the ether ETFs had really successful launches. So how do we measure that? First and foremost, for us in the industry, a successful ETF is one that delivers what it's supposed to deliver. Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get that. and how to front-run the opportunity. I'm David Hoffman, just me today,

and I'm here to help you become more bankless. Extremely powerful episode today. It's not every day that you have a conversation with someone who oversees $6.6.6 trillion. Yes, that's trillion with a T. Samara Cohen is on the show today, and she is a badass. Samara is the chief investment officer

of ETX and index investments at BlackRock. That's basically all of BlackRock's i-shares ETF funds all their index products, which is quite a large domain to say the least. Samara has an affinity for the modernization of markets, which is something that I think we share with her on bankless. Not only is she down in the black rock trenches, building ETFs, talking to clients, and producing market-based intelligence, but she can also see things from a zoomed outview and can discuss the long arc of the interaction of technology and markets, which I think is truly helpful when we are currently in an age in which blockchain tech is actually starting to disrupt

traditional markets. This is one of my favorite conversations I've had on Bankless in a long time. In addition to all the other things that I've already said about Samara, she's also just so easy to talk to. So I know you're going to enjoy this one, Bankless Nation.

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Don't miss out on the opportunity to stake, restake, and shape the future of M-Eath protocol with Cook. Participate today at M-Eath.mantle.xy-Z. Bankless Nation, I am very excited to introduce you to Samara Kohen, the chief investment officer of ETF and Index Investments. Samara leads the team that manages 6.6 trillion, 6.6 trillion with AT of BlackRock's index funds and I shares, ETFs. Samara, welcome to bankless. Thank you so much for having me. I'm glad to be here. So last time we spoke with BlackRock, we spoke with Robbie Mishnik, who's the head of the digital assets team at Black Rock in September of 2024. It's now January of 2025. And you are also not Robbie Mishnick. You are Samara Cohen.

Thank you. Can you introduce yourself a little bit more for the audience? illuminate a little bit of who you are and what you do at Black Rock, just so we know who we're talking to. Sure. I listened to the podcast with Robbie, which was great. And I am a listener of the podcast myself, so very happy to be having the conversation with you directly. So I am, as you said, the chief investment officer of ETFs and index at BlackRock. I'm responsible for the portfolio management of our index portfolios, our I shares, ETFs, and making sure they trade in the market with the, you know, access, high quality that investors expect from my shares. I think of myself,

though, just by way of background, is really a career markets modernizer. I've been in the ETF business for just 10 years now, but when BlackRock first reached out to me at the job I was before then, which was at a large investment bank, I didn't know what an ETF was. I had to Google, you know, what is an ETF, which was actually relatively typical. of a person who was growing up in the fixed income and derivatives division of a bank then. But my passion has always been making markets more resilient and more transparent and pretty much more useful for more people. So that's what brought me from that job to BlackRock and into the ETF business. I work really closely with Robbie Mitchnik, who's our head of digital

assets and who has taught me a huge amount of what I know about crypto and the digital assets world. but really, ETFs are also, and have been in markets, a disruptive technology that incite many of the same goals. What role does technology play in your job? You called yourself a markets modernizer. Maybe you could illuminate that modernizing word a little bit more. What does it mean and what have you done to modernize markets? Is this like an evolution of technology? Is this novel financial products? How do markets become modernized? And how have you played a role in that? Sure. So I'll try not to get too nerdy and weedy with this answer, but I would argue that technology innovation is foundational to the modernization of markets and has been for literally millennia. I like talking about, you know, this past spring, I took my teen daughter to Paris where she'd always wanted to go. and we went to the Louvre Museum, and the one thing I really wanted to see, because I knew it was there,

was this relic from ancient Mesopotamia. It's considered a token, actually, a clay token, but it was how trade was conducted initially thousands of years ago, and it was a mechanism to exchange a, what was then, a real-world asset and kind of difficult to bring to the marketplace, and that clay token, thousands of years ago, ago was a technological breakthrough that contributed to the next phase of markets. So it was foundational then, and it's foundational now. Now, you know, as we said, ETFs and index are both in my title.

Index strategies, which are the ability for an investor with not that much money to commit to actually diversify their portfolio by buying hundreds or thousands of line items, That wasn't possible, actually, until really about 30 to 40 years ago and indexing as a portfolio strategy actually came of age with the first commercial microchip because it actually took more computing power than had been available before to take what had been really a mathematical concept and turn it into a trading reality. So that's like a few thousand years of history with technology is the through point. Very interesting. I think we at Bankless really appreciate seeing the long arc of technology as it relates to markets. So I think that's maybe something that we share. So understanding the context of once we had clay tokens representing real world assets and going through the evolution of markets to the world of ETFs as you've just illuminated, we are now kind of entering this world of modern markets integrating with blockchains or blockchains integrating with modern markets, bi-directional.

So now you've entered in the world where there's now two very large ETFs. And I think this is just the beginning. Maybe you could place us in history now in the modern era where technology, blockchain, assets are now manifesting in the real world and in traditional markets. But then also it's like a foot in the door, right? So where does this go for here? Just place us in history as you see it, if you don't mind. Yeah, I love that question.

You know, the Bitcoin ETFs in the U.S. is a category. And I should actually say, because our regulators want us to say, they are ETPs, not ETS, exchange traded products. and definitions are important, have been around for exactly a year almost to the day of this conversation. And you're right, this has been, I think, a watershed moment in markets and yet also the very beginning. So what's so important about the Bitcoin ETPs, in my view, is that they really created a bridge between these two worlds, between the crypto world and the Tradfai world. one of the things that I think surprised us to a degree this year was how useful that bridge was to people on both sides.

We knew there were Tradfai investors that if they were going to allocate to Bitcoin, wanted to do it in a familiar wrapper. But there were a lot of digital kind of native investors who also found that the ETP wrapper served their needs. And we actually have some pretty good data showing that there are investors who bought their very, first ETP in one of the Bitcoin ETPs and are now buying other ETPs. So hopefully it's helping both, you know, digital native as well as Tradfi investors build more diversified portfolios that are more customized to what they need. So that's why it was such an important moment and we really saw in all of the numbers and the flows this year how embraced this bridge was. But, you know, again, to your point, it's the story of one cryptocurrency, and it's a story, frankly, of

Tradify Rails being very important bringing that cryptocurrency more into the investor dialogue. And so I think that's why it is still the very beginning, both as we see crypto rails and the crypto financial ecosystem develop more. And also hopefully, in my view, and I'm interested in hearing your view on this as well, develop in an integrated way with what already exists and works. Because I think there's always a lot of passion out there to completely disrupt and do things differently. And sometimes that is the right direction. As a career markets modernizer, I think we find a lot of times that the best world is the one that creates bridges and looks to best practices from multiple places. Yeah. I think people who are

deeply cryptonatives and they believe in the cryptoization of everything might resonate with something that I want to get your take on. I think this got incepted into my brain with one of the short stories from Andreas Antonopoulos. He called it something like technology inversion and he used the metaphor of dial-up internet where the internet and data was squeezed through telephone lines into people's homes and that's what dial-up internet was. And now later, we actually just got broadband. We just got cable, internet, and was much faster. And now, when you make a phone call with someone, the phone actually goes on the internet, along with everything else that's on the internet, you know, the YouTube, Twitter, Facebook, Instagram, and then also, you know, phones. And so things flipped,

things inverted. And I think the correlation here, the way to apply this to crypto is that right now we have analog versions of these, like, crypto assets. We have the Bitcoin ETF, the ether ETF, but it's kind of the analog. It's trying to squeeze the internet through dial-up, where I think crypto-natives are really looking for the inversion, where all of a sudden more of what BlackRock does, more of what the NASDAQ does, is actually on a blockchain. Maybe there is a BlackRock chain one day. Maybe that's a little bit futuristic, but I'm wondering your take on that perspective. So I agree with you. That's the vision that crypto-natives have. I think for me, the question is, Is that the vision that serves markets and investors best at this moment in time?

I'm not convinced that it is. You know, it's interesting. I think my lens on crypto is kind of hard to extract from my lens on being a parent. My daughter is 16, and she was born October 10th of 2008. And so she was born kind of, you know, 21 days before the white paper was published. And it was also during the great financial crisis. And while these things are obviously not correlated, that moment in time was a big one for me in my career and determining kind of where I wanted to spend the rest of my career and really wanting to, if I was going to continue a career in markets, which is my passion and what I love doing, I wanted to be a part of increasing resilience, access, and transparency in markets. I think, though, that the vision of crypto, which has huge benefits from a transparency,

auditability perspective, I think where I call into question that crypto-native vision is around the degree of centralization that's ultimately most important. Because again, as a parent, like, the more decentralized a world, the more you have to become the expert yourself. And I think that really the reason trade intermediaries have grown over, you know, decades, centuries, millennia is because people want to focus on the things that they're experts in and they are sometimes very willing to trust an intermediary. However, crypto can make that process of trust work better. I'd like to zoom into the here and now. As you mentioned, the Bitcoin ETFs are almost one year old. The ether ETF's about six months old. How should we evaluate the development and progress and success of these ETFs? How are they tracking versus expectations?

So I feel like I am becoming increasingly bilingual in Tradfai markets as well as crypto. I'm much more of like a... Speak crypto now. I'm more like tourist crypto. Okay. And, you know, I have more fluency in Tradfine markets. But it's interesting to me increasingly to see the misperceptions on both sides of that divide. And one of the misperceptions on the crypto side is that the ether ETFs weren't as successful as the Bitcoin ETFs, where really by all accounts in the ETFs, the ether ETFs had

really successful launches. So how do we measure that? First and foremost, for us in the industry, a successful ETF is one that delivers what it's supposed to deliver. So it tracks the underlying index with absolute precision. It's one of the reasons that Bitcoin ETFs became important because what we were hearing from investors was that they didn't have many ways outside of actually holding Bitcoin, you know, in self-custody or on exchange. They didn't have many ways to hold it in a kind of, you know, trad-fi wrapper where they could view it alongside the rest of their portfolio in a way that tracked. They were buying a futures ETF, which as you probably know for reasons around position limits mistracked. They were buying proxy stocks. And so the tracking of

the ETF, the precision of that is number one, how we measure success. Number two is market quality. And what we mean by that is it takes really an ecosystem of players to create trading volumes, liquidity, access on exchange. For us, it was the authorized participants who were agreeing to do create and redeem in the ETF. So making sure all all of those things are in place. We call that market quality. Both the Bitcoin ETF and the Ether ETF have tracked. They've had high market quality, high participation. Now, the flows have been different. And this kind of gets me to, you know, misperception number two. And there's definitely misperceptions on both sides. But that's that creating an ETF drives flows. It

doesn't. Investors and investor sentiment drives flows. And in 2024, for investors, the thesis around Bitcoin was much more tangible than the investment thesis around ETH. And that explains the, you know, disparity in flow. However, they've both been, I think, that, you know, the Bitcoin ETF, as you probably know, really beat all ETF records in history. But the ETH ETF was still in the top 20% of ETAF launches in the United States this year. So we feel the both

as successful. It's interesting to hear that you're saying that it's really the marketing, the narrative, the identity of the ETH ETF that can be the reason why investors buy versus don't buy. And I think this is definitely something we learned as an industry. It's like the Bitcoin story

is just so easy to tell. It's very symbol, 21 million limit, it's digital gold, that's it. And then the ether story just doesn't have that same firepower, that same punch. We asked Robbie, I remember a similar question to this, but that was again back in September. And also since then, ether, ETF flows has picked up significantly in the last month or so. I'm wondering if there's any new conversations that you're hearing from clients, just what's the gossip mill sound like in the terms of people who are buying the Bitcoin ETF or the ether ETF? Is there anything different than when we checked in four or five months ago?

I don't think there's that much that's different. I will give my take on a couple of things that you just said. And actually, David, as a fun fact, I should tell you how I started listening to the podcast because I think I'd listened to it from time to time. And if you recall, the SEC really surprised the industry with its approval of ETFs that happened in May. The industry was ready for it to happen. And we kind of had the playbook from the Bitcoin ETPs.

But that was a surprise. And if you remember, and you guys covered this very closely, that period of June through early July, we really weren't sure when trading would start. And so we were, you know, looking at everything, our portfolio readiness, trading, operational, as well as the education strategy around how we would position the ETS when they came out. So I was one weekend, a lot of my favorite content in crypto has actually been through podcasts versus a lot of the stuff that I normally read. So I was just searching through podcasts, and I saw this podcast called The Great Eith Pitchoff. Oh, yeah. And I thought, well, this sounds like it could be useful. And so I listened to that.

And I actually thought it was really, I mean, you guys were funny, but also very thoughtful and educational. Yeah, that's what we go for. Yeah. Well, you get the combination of things. You've covered a lot of things really well, I think. Thank you. But that's when I started listening to the podcast. But I will say this.

I think your frustration. then, which is a little bit of what you just said, was that it was just harder to explain. It was a tougher narrative. I actually think that's true, but I don't think that's the crux of the issue. Investors are smart and the what we call self-directed or individual investors who are really driving the success right now of the Bitcoin ETP range from, you know, really small investors to very sophisticated investors. It's a very broad space. And I think generally speaking, They understand the difference. They don't buy the investment thesis at this moment in time to the same degree.

It's not as relevant as the Bitcoin thesis is in a moment of time where we have heightened geopolitical tension, concern over kind of broad-based disruptions, concern over the dollar deficits. So all of these things play really well into the Bitcoin thesis, on top of which what's really an investor psyche right now, I think, is that 2022 was a brutally hard year for TratFi investors because stocks and bonds went down together. That was a historical, you know, event. And it really made people think about how do I diversify my portfolio? You know, are there alts that can create some sort of ballast in a traditional kind of 60-40 equity bond portfolio? And there's a really interesting analysis you can do around the Bitcoin plays in that scenario, where at the same time, particularly for the U.S. investor who is in, whether it is through an active strategy or an

index strategy, you know, likely pretty exposed to mega-cap tech, I think often they feel that the ETH story is less of a diversifier and more of an amplifier to some of the exposures they have. So I think that both, you know, the industry as well as investors are on that educational journey, and it's not that they don't get it. I think that Bitcoin has just been more relevant at the portfolio conversation right now. Yeah. There's always just maybe narrative market fit, asset market fit for the times that we are inside of. And I think there is just a lot of like geopolitical relevancy over the last few years. And maybe Bitcoin is simply just a stronger player in that sort of environment.

I'm wondering, does BlackRock provide any recommendations in terms of allocation for investors interested in holding exposure to Bitcoin, the Bitcoin ETP, or the Ether ETP? Is that something that you guys do? And if so, what are those recommendations? So we're not an investment advisor. We don't provide investment advice. But we do put out investment research, and it's generally rooted in risk and how we look at portfolio risk. And we do that across asset classes, countries, strategies. And we have started writing about Bitcoin. We haven't yet. written about ETH in the portfolio context. Because most of this year, I mean, again, ETH is, you know, six months old versus Bitcoin a year old. So initially with Bitcoin, it was really educating around Bitcoin, the asset class, and also importantly, for the digital native investors who understand Bitcoin, educating around ETPs and the ETP wrapper. And we're still on that journey with Eith. Over the last few months, though, we did write twice, and we'll continue to do so on Bitcoin in the portfolio.

So we wrote about Bitcoin as a diversifier. And the reasons we think it's interesting or, you know, relevant for investors who are thinking about an allocation to Bitcoin to think about the potential diversification aspects of Bitcoin versus, you know, equities and bonds and in the traditional 6040 portfolio. Then we actually took it a step further. And I think probably about a month ago, we wrote a piece. that I think is really interesting on portfolio interactions of Bitcoin. And that's the first place we talked about potentially sizing and allocation. And this, of course, is for an investor who has

determined I am, you know, interested in participating in Bitcoin because there's lots of investors, particularly on the institutional side who aren't there yet, but for investors who want to incorporate Bitcoin in their portfolios, how do you think about it in the context of a diversified portfolio? And we thought an interesting frame. given that so many investors are already in some way exposed to the, you know, Mag 7 stocks, we looked at portfolio risk contribution of different levels of Bitcoin allocation and how that would compare to a Mag 7 stock. And that's not to say that Bitcoin is at all, like any of those stocks, is different, but taking a risk-centered approach to how to think about a Bitcoin

allocation and its contribution to overall portfolio risk, we thought was something that investors would really understand. And that came out of a lot of the conversations that we have with our clients. And where we came out in that piece was that a one to two percent allocation to Bitcoin got you to the same level of risk contribution as a MAG7 stock and going above 2 percent would exponentially increase the risk contribution. So if you were to go above 2%, you were really making a very strong view on Bitcoin, specifically, versus trying to keep it in the bounds of this diversified portfolio. Now, who are the people that are consuming this information? This is, I'm sure, very robust analysis.

Who's the intended audience for who is supposed to hear that information? So we talk to investors across the spectrum, large. the investors that we talk to directly are advisors who have, you know, their own clients. And we also talk to institutions. And then we do make a lot of information available on our website for individual investors. The diversifier piece is out on our website for everybody. The portfolio allocation may be for advisors and institutions, but we really write for all of those audiences. Yeah, I guess since you have $6.6 trillion in ETFs and index products, maybe the answer to who is reading this is some chunk of whoever is operating that $6.6 trillion of ETFs and index products.

Well, but remember this. The $6.6 trillion doesn't have any crypto in at all. That's all of our equity ETFs, our fixed income ETFs, the only crypto that we hold, because you would know this, one of the things about the index and ETF portfolios is they are completely transparent. We publish holdings on a daily basis. So the only crypto in those. portfolios right now is actually in the two crypto ETPs, Bitcoin and ETH. I would like to get your opinion on what we want to see out of the ETFs in 2025. If there was like a rubric of sorts with things that you wanted to see the Bitcoin, ETP and the ETH ETP check off as achievements in 2025 of this year, what might be on that

list? What's some things that you feel like are pretty safe that we're going to get? What are some things that are maybe a little bit harder that you're optimistic for? And then maybe what are some potential stretch goals? Well, so first of all, I think that this work being done around Bitcoin and the portfolio construct is really important. And I hope we see more of that in 2025. I hope the conversation becomes less about Bitcoin or not Bitcoin and more about how is Bitcoin manifesting in the portfolio, where is it useful, where is it not useful? And look, the experience of the next,

you know, few months and the next year is going to be very instructive in terms of where that goes. It's important to remember that relative to, you know, lots of other asset classes, Bitcoin still has a pretty limited history. So there's lots of investors who say, hey, conceptually, this makes sense. But it's really hard for me to do the type of, you know, backtesting and analytics that I'd want to do with kind of, you know, call it 10 meaningful years of trading data. So the more market cycles we weather, the more data that comes available, the easier it is to kind of integrate Bitcoin into the broad. broader conversation around risk and asset returns. So that's number one. Number two, which is a little

bit more specific, is I think the launch of options on the Bitcoin ETPs was a really important moment in November. Generally speaking, options ecosystems are really good for markets. They tend to create more balanced trading dynamics. You will have buyers on the way down, sellers on the way up. And so seeing how that plays out is going to be really important. On the other hand, and I was having this conversation with someone yesterday, actually, with Bob Pisani on CNBC, innovation and complexity go hand in hand. And there are lots of people who are really excited about launching and pitching options-based strategies. And some of those will be really useful for investors. And some of them may be really hard to understand.

And so I think the more options are incorporated into, you know, product strategies around Bitcoin, the more important it is that we really put out good, clear education on what investors are buying. But generally speaking, options help investors go in multiple directions. It helps them kind of tailor their exposures, participate with limited downside, you know, achieve income. And so I think the development and the use of options ecosystems is going to be interesting. You know, we've even seen interesting dynamics in the last few weeks where, as you expect, when options were launched, there were so much more demand for calls versus put. So upside protection versus downside protection. That started flipping a little bit. And that's going to give us a lot of information and transparency around investor sentiment.

And that level of transparency, actually, is really accretive to healthy markets. So when I think about the hallmarks of a more mature, resilient market, the development of this options ecosystem in ETPs, I think will be helpful both for the underlying crypto assets and also probably for their digital native derivative markets, which don't have as much transparency as they will need to really achieve more uptake among investors. I'm going to quote friend of the podcast, Alex Thorne here. BlackRock, Ibit options are absolutely dominating. The volume on Ibit is dominating versus the vanilla ETFs. Also, Etha, the BlackRock Ether ETP, has also recently started to take the lead on volume on the Ethereum side. And the question is, what has BlackRock that growth? Or was that all just emergent and just part of the product of maybe the elections or just the times that we are in?

Is there anything from the top-down side of things that BlackRock did to help promote volumes on the options in the Ether A product? Well, remember, we're not options market makers. We're not option traders. But we do invest a lot of time and attention in the options ecosystem because, again, going back to how do we measure a successful ETF, high levels of market quality. And in our experience, ETPs that have developed options ecosystems around them have higher market quality than those that. that don't. So we think investing in options ecosystems is an important use of, you know, time and resources. We spent a lot of time with NASDAQ on it, of course, and I bet options actually ended up launching the day before the rest of the suites, I think, because we are just, you know, very focused on options and making them available when we think there's investor demand for them, and there clearly was in this case. But what's differentiating about the I shares platform,

is that, I mean, you gave some of the headline numbers, but that's actually not the most exciting part of it. I think what's exciting about the platform is that we cover virtually all asset classes, all countries, and so we have very deep ties into the trading ecosystem and are able to work very closely across the trading ecosystem to understand what do market makers need in order to commit their own capital and technology. to making markets and participating. And there's a lot of things around Bitcoin that are very attractive to market makers. It's a high volatility asset. The volatility of volatility is high.

And it also has this, like what we think of as positive skewiness. The volatility historically generally has gone up when prices go up, right, which also makes it attractive. So we spend a lot of time on those dynamics and we engage a lot in the options ecosystem. Sello is transitioning from a mobile-first, EVM-compatible layer-1 blockchain to a high-performance Ethereum Layer 2, built on OP-Stack with eigen-DA and one-block finality, all happening soon with a hard fork. With over 600 million total transactions, 12 million weekly transactions, and 750,000 daily active users, cello's meteoric rise would place it among one of the top layer 2s, built for the real world and optimized for fast,

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What is that unlocking? Is that unlocking further institutions to deploy more capital? What does the legitimacy and the market quality unlock for the Bitcoin ETFs? in the ether ETFs as they achieve them. I think I'd replace the word legitimacy with transparency and access. So options provide a new level of transparency and access. And I would say it's been interesting to me on my own crypto journey because theoretically there is so much transparency in crypto. But actually, if you are a trader or an investor, there are so many different sources of

price information, transparency is harder to procure. in crypto markets in some ways than you would expect it to. And so bringing volatility instruments onto exchanges and listed exchanges so investors can kind of standardize and source and commit capital to prices, which allows us to really see where volatility is and where it's trading, that level of transparency and access is a game changer for markets and wasn't there to the extent I might have thought it would be. you know, a few years ago in crypto. So I think that's kind of point number one. And point number two is absolutely, we often see that investors who want exposure to an asset class, but for whatever

set of reasons aren't ready to commit in, you know, fully to the underlying, they will come to the asset class via the options market. We've actually seen that historically. I told you, there's a lot of parallels between exchange traded funds and options. Exchange traded funds have grown explosively over the past 20 years, and a lot of institutional investors came to exchange traded funds initially through options on exchange traded funds. They thought it would be, they appreciated the idea of the exposure, but they wanted to have more of a limited capital outlay and limited downside to start, and they came to the, you know, underlying wrapper via the options market. So that's an important dimension too.

There's a famous quip in Bitcoin land that the price of Bitcoin is its marketing department. Price is the best marketing for Bitcoin. And I'm wondering if you just have any anecdotes, you can share about what it was like since the Bitcoin ETFs were launched when Bitcoin crossed $100,000, a historic milestone. What was that like on the inside of BlackRock? Was there any communications with clients or fund advisors or anything like that? Any anecdote you can share that's related to the idea that price is the best marketing for Bitcoin. I think education is the best marketing for Bitcoin. I think education and work around risk and had a harness risk in a diversifying way and look at portfolio interactions.

From my perspective and how we talk to investors, that's actually the best marketing for Bitcoin. Actually, I think it's important that investors are reminded despite the highs that Bitcoin was reaching into the end of the year, that this, you know, although price volatility in Bitcoin has dropped meaningfully in the last few years, it still is, by any measure, a risky volatile asset versus pretty much anything else that investors have in their portfolios. And that's actually part of what creates relevance for it right now. If it didn't have, you know, those volatility characteristics, it might not have the same investment thesis as a diversifier that it has.

but actually keeping in front of investors, and particularly long-term investors, which is, you know, largely who we are talking to, those facts, has actually been a lot more significant than the price action of Bitcoin. And actually, this gets me back to this point around misperceptions. I do think in the crypto world, there was this view that success in the ETF was that the price of the underlying went higher. and that is absolutely not how we would ever measure success of an ETP. It's does it effectively provide access, have market quality, and play a role in an investor's portfolio. I was wondering, potentially in the Ethereum land, there's future upgrades to the Ethereum blockchain that may or may not impact the fundamentals of ether or just the blockchain at large, but then that's also true for Bitcoin as well. Does BlackRock have any view about future upgrades to the protocols of which it has ETFs for? would BlackRock ever take a stance on upgrade proposals out of these blockchain systems?

So first, I would say BlackRock is about 20,000 people. So BlackRock, you know, is never going to have a kind of, you know, monolithic view. The best person to talk to about that, of course, would be Robbie Mitznik. And, you know, Robbie will certainly have views. And I think with respect to how we engage in the industry, there are many times that we do go out and, you know, speak to our views, although generally speaking, if I look at other, you know, trading environments, trading ecosystems, Our views will be kind of rooted in the principles of what makes an ecosystem the most useful for us and our clients. Because we generally favor just open architecture and interoperability, which at its core, operating at our scale, is something we need everywhere we transact. Generally speaking, having to operate in a closed ecosystem can be very limiting for us. It's one of the reasons from a tokenization perspective, one of the pivot. we did make pretty publicly over the last couple of years was leaning much more towards public versus permissioned blockchains. So I think in terms of stances you'll hear from us, it would be more along those lines versus one kind of, you know, crypto platform versus another.

But scalability and the aspects of scalability and particularly the prerequisites for our counterparties to participate is something I would expect us to be vocal about. One thing that I think the entire crypto industry is hopeful for is that we are not at all close to being done with the increased ETFization, the indexization of some of our crypto assets. You know, we have our number one and number two, Bitcoin and Ether. But I think we're hopeful by the end of hopefully 2025, we at least have signs of number three and number four and maybe number five. and then hopefully in, you know, five to 10 years, there's more than we can really count.

Does BlackRock have any other plans for other digital asset ETFs? Or what would it look like to start to see some plans starting to come together? So I guess I actually have a question for you if you want to share your thoughts on this. But it's why do you think that is so important and of such focus? Because I sometimes, again, worry that going back to misperception number one, that you launch an ETF and the price of something goes up, that's a misperception. And I wonder whether some of that misperception is driving the excitement over kind of multiple coin ETFs. We root our decisions based in like investment thesis in the portfolio.

But what do you think is driving that? Oh, I think it is absolutely exactly what you identified. I think if you are a community member of a respective blockchain ecosystem and it does not yet have an ETF, you see the ETF as a catalyst for price appreciation of your respective crypto asset. And to be fair, that is what happened with Bitcoin. Maybe it's not exactly what happened with Ether. Maybe Ether didn't really exactly have a very strong price appreciation post the launch with the ETS, but Bitcoin certainly did. And that is what the narrative has become in the world of crypto. And the narrative, I think, is because the ETFs unlock access to investors in a particular

asset that did not exist prior. There's also some amount of legitimization. So if something has got an ETF, it's legitimized by Tradfai. It's opened up to potentially pools of capital that it didn't have prior. And also there is a regulatory derisking as well. Maybe this is less relevant for the incoming administration. But for the previous administration, an ETF is kind of considered as a shield of armor against Gary Gensler and the SEC. And so I think some combinations of those reasons, Everyone in the crypto industry wants an ETF for the respective asset that they hold. Yeah, interesting. I think that there's a lot to unpack there.

Categorically, launching an ETF does not magically create price appreciation. And by the way, this is a conversation I have had for the past 10 years. Wherever I go in the world, I might be in a country that has, you know, a relatively less developed stock market. And, you know, the CEO of the exchange there will come and say, to me, hey, can you guys come and launch ETFs here? Because the idea that they have is you launch ETFs and magically it creates liquidity and demand for the underlying. And it really works in the reverse way. So I think what's important is really to parse out what will the investment thesis be for each of these native tokens of these different blockchains? How do you measure it? How do you

describe cash flows to it? And how do you look at risk? What's unique about Bitcoin is not that it is the oldest is funny. It's a year old, but oldest, you know, U.S. listed ETP. It's that it actually has a very unique investment thesis where the kind of future price is entirely a function of the level of adoption given the, you know, scarcity, finite supply and Bitcoin, you know, and this is the part, yes, it's easier to understand because Bitcoin is generally only trying to be. one thing, this borderless store of value. However, despite the more complex investment thesis of these other tokens, you still need a way to ascribe cash flows and to look at them, you know, one to the other. And that's the story that has to be told. And, you know, from my perspective, I think most successful ETP launches will follow that. But to your point, there's, you know, lots of excitement. And I think the regulatory path may become much clearer to launch an ETP on any token that you want. But, you know, without speaking for other issuers,

the way, you know, we approach it is really like reading the work and what we hear from our clients has a role in their portfolio right now. Me and Ryan, we do the weekly roll up every Friday, and we look at the inflows into the Bitcoin ETFs and the inflows into the Ether ETFs. I know you do. Yeah, right, yeah. I mean, BlackRock is usually like the number one there, inflow on a weekly basis. And just looking at it right now, Bitcoin has 35, almost 36, billion dollars of net inflows into the Bitcoin ETFs. And I think when people in the crypto industry hear that, they are thinking, well, that is $36 billion of buying pressure. Now, granted, there could have been maybe a majority percentage of that inflows that was sold by actual physical bitcoins

coins sold by crypto investors and then re-bought in the ETF package just for whatever reason, tax advantages, convenience advantages. And so maybe only a minority of that inflow pressure is actually true net buying. But nonetheless, people think that some percentage of this inflows into the Bitcoin ETFs is true buying pressure that did impact the price of Bitcoin in a positive direction. Is that wrong? Is that naive? How should we think about this? I don't think it's wrong. I just think that there's Bitcoin buying in all wrappers. And you see that in the ETP flows. Now, one of the things that we really like to look at, we call it the secondary primary ratio, is that imbalance of demand and those net inflows, like when people actually, because, of course,

a market maker doesn't have to create new shares of the ETF. And it's when they create new shares of the ETF, they deliver coin to the ETF, and you actually see the inflows. There is nine times as much trading that is actually happening between buyers and sellers of the ETP, such that no coin gets exchanged at all. That's a really interesting statistic, I think, in terms of looking at market sentiment, is how much, like, incremental exchange is happening outside of actual inflows. But, yes, categorically, inflows show an imbalance of, you know, buying versus selling. And some of that is net new buying, but there's net buying happening across other rappers as well. I don't think it's a function of the existence of the ETP yet. I think. I think that. I think,

that there are institutions that may do their first sizable Bitcoin allocations via the ETP wrapper where they haven't had any allocations so far. That has not largely been the story, though, of 2024. And that gets back to this was a big year, but it really is the beginning, that conversation around institutional adoption and also a wealth advisor adoption, that's going to be the important story of 25 and beyond. Beautiful. I do actually want to get back to the original question of, does BlackRock have any plans for other digital asset ETPs? And what can you share with us on that front?

I mean, we're pretty public about it. And I do get a lot of commentary on crypto Twitter, which we should talk about for a second, because I think crypto Twitter can be unproductively mean. Oh, I'm aware. Yeah. Our plans right now are around Bitcoin and ETH. That's where we hear from our clients.

there is the, you know, portfolio level interest, you know, with respect to where our focus is right now. And we have focuses, obviously, in digital assets beyond the ETP. We're very focused on tokenization and tokenization of treasury funds. We're, you know, very interested in kind of the future path around stable coins. And our, when we think about our digital asset strategy, it's kind of those pillars of crypto, stable coins, and tokenization. So for us, there is a world beyond new coins in an ETP. But with respect to our near-term strategy, our focus is really Bitcoin and E. Understood.

Understood. I want to get into a little subject about regulation, but maybe first before we get there, we are about to have a new administration, one that has positioned itself to be more free markets, more pro-markets. Gary Gensler will be resigning in six days. Maybe that's more relevant to us, crypto-natives. and it is to BlackRock, but we are very excited about it on the crypto side of things. Has this incoming new administration change any strategy or impacted anything at all as it relates

to Black Rock's involvement in the crypto industry? Yeah, look, I think, first of all, nobody's in place yet, to your point. Yes. We are a few days away from inauguration. And to be super clear, the SEC impacts absolutely everybody in financial markets, certainly in the U.S., and I would argue as well, around the world. So we care deeply and we engage very close. with the SEC. I think taking a pretty big step back from kind of the current administration,

U.S. markets have generally done a better job at supporting innovation and supporting investors at the same time than anywhere else in the world. And that's why U.S. markets kind of have the prominence that they do today. It is that combination of support for innovation and appropriate investor protections that I think are really the hallmark of what we do really well. So I'm pretty excited and optimistic that that is the direction we will return to. There's been, you know, less transparency, and that's played out pretty publicly, certainly around the crypto ETPs, but in other ways as well. Now, recall a lot of what impacted this SEC, some of the stock market volatility and dislocations that characterized 2020, 2021. Like, one of the big themes in global markets

right now is this heightened participation by individual investors. So like you or me, trading through an online brokerage account. And there was a huge spike in that in the U.S. at the beginning of 2020 because a lot of treating platforms started offering commission-free trading. People were at home over COVID and getting more comfortable with technology, and then a lot of people got stimulus checks. And so those three things combined created a lot of, like, individual traders in the markets. And importantly, a lot of those traders actually kind of stayed in the markets and became index and ETP investors. But markets have changed and are changing in the U.S. and around the world because of the participation of retail. And that has just created a wave

of regulatory focus that has really dominated the last few years. But I think to your point, yes, I think that it is exciting to be looking ahead to a more innovation supportive environment. But I will say I really hope, and I think that you and Ryan have done a really nice job of covering in a balanced way the impact, just positive and negative of regulation, a lack of regulation, a lack of regulation, a lack of guardrails can really undermine investor confidence. And maintaining and growing investor confidence is one of the single most important things for this market to meet its potential. So my hope, you know, and my engagement and I hope, you know, yours as well is going to really be around, how do you strike the balance between those two things? Is there anything that BlackRock is

anticipating for for regulation in 2025? There's a potential set of bills out there, stable coin bill, anything that Black Rock is hopeful for or anticipating in 2025? Yeah. So we're hopeful that a lot of the basics get established. So things like definitions, things like jurisdiction, like who's the regulator, who's responsible. There's a lot of work that has to be done to simply figure out, like, who's going to engage, who can you ask questions to, who do you work with? Because to get this right is really going to require collaboration by the public and private sector, which is why I think it's generally a positive sign that there's a number of private sector experts that are signaling the fact that they are going to be engaged in positions

of influence. That's going to be really important. That's always important in terms of areas of new technologies. So number one, the basics, like jurisdiction, who's responsible, definitions, you know, what's the security? And in terms of the existing bills, whether it's Fit 21, which I think is, you know, an important step forward that probably could be a little better integrated with some of, you know, what exists in TradFi. I think what happened in the last couple of years is what you see in some of the bills is a footprint of a lot of crypto engagement and in some cases the development of a separate crypto ecosystem, which I'm not sure in the long term that that's the best outcome because you want existing players to be able to invest in not.

face a whole duplicative set of regulations. So ideally, you have something that works for people that are new and something that works for people that aren't new but want to participate in this space. But I think Bit21 goes in that direction, as does the stable coin bill. And I think outside of those bills, my hope, and I think my expectation as well is that there will be more work around interoperability so that more trad-fi market experts, can play a bigger role in the future. Now specifically about the way that BlackRock is built, there are two teams at BlackRock that I know of

that touched digital assets, the digital assets team, and then also the ETS team, which you run. How do these two teams engage with each other? What does it look like when these two teams are talking with each other? I actually think it's cooler than that. So we have a digital assets team, and I think one of the most important things we did as a firm in terms of progressing our digital asset strategy

was putting in place the team, you know, with Robbie's leadership. But what Robbie did is he really made digital assets the work of everybody at the firm. So years ago, I mean, we were spending hours together. Robbie, you know, to his credit, is an incredibly patient, resilient, and thoughtful person. But he spent a lot of time educating the businesses and giving all businesses. So ETFs, index, trading, cash, securities lending, derivatives, giving all the businesses the opportunity to consider what are your use cases, you know, helping us bringing in, you know, kind of being a digital asset consultant so that every business could consider what the applications were to them. And what we found in our business, you know,

when I started working with him years ago, was we had this initial excitement, and this was very typical in TradFi Lego, Bitcoin, let's put that to the side. It's like this blockchain technology that's really going to be the game changer. We came up with all of these use cases, we piloted some things. Nine times out of 10, we realized, okay, we need a better technology solution, but blockchain isn't necessarily the answer. But that was actually the impetus for some of our bigger technology upgrades was doing that work where we knew there was a friction and we had to fix it. But then eventually, you know, both of those things really became clear where there were more industrialized use cases. But I guess that's a long-winded answer to your question.

question. These aren't teams that sit in distinct verticals. We have a digital assets team that kind of cuts across as a horizontal that lets us really consider in a much broader way what our potential use cases and opportunities are. So I guess it's really just a matter of Robbie innervating with all the other parts of BlackRock and really convincing them that crypto for that particular part of the organization is the right tool for the job if and when the moment comes like crypto is truly the right tool for the job. Is that a way to interpret things? I think that's right. And it also means, you know, you have to have somebody who has skin in the game and is accountable for their actual business results to commit and then to partner with the digital assets team.

And that's worked pretty well. Well, Robbie, we're rooting for you. Samara, I think I can also speak for Ryan, who's not here at the moment, obviously, that we were both very honored that you listened to the podcast on such a frequent basis. Who would you like to hear as a guest on the podcast? who would really nerdsnipe you as a very fascinating guest that you'd like to hear from. Well, I'm incredibly interested in some of the new policy voices that come out, particularly over the next couple of months. I think I told you one of my favorite episodes was when you had Austin Campbell on. I actually reached out to him after the podcast and just met up with him and talked to him. He, like me, has a derivatives stratify background, so I knew we had a lot in common.

and he wants to, like, create a better financial system. And so I think people like that who, oh, I have another misperception for you, David. Sometimes when you do these episodes like the Heath Pitchoff or Austin Campbell, you guys preface it with, okay, bankless citizen, this episode is not for you. It is for your, like, grandparents who we're trying to educate around this. And I would say, like, we're not all that old. There have been a few times. I'm like, really, really? Like, I'm not your girl.

Like, parent maybe, but, like, grandparent, that's a little bit of a stretch. I actually think that there are a lot of people in positions like mine who care deeply about, like, the legacy they're leaving in markets. And again, I'm a parent of two teen kids. There's nothing that's more important to me than what their financial futures. are going to be and how they engage with the financial system and how we create resilience and access and transparency for them. So I do think that my hope for you, I know you guys get super excited when you talk about like blocks and blobs and, you know, this. We do like the blobs. I know you like the blobs. And I know it's a thing that scales Eath, but like that's kind of the

extent for me. But I think thinking about how you can talk to that broader audience with people like the Austin Campbell's of the world would be really. impactful. Yeah. Austin Campbell was a great guest, as you have also been a great guest. And sometimes it's actually really the guest that really helps us get the message out. And I think that's something that we've done here today on the podcast. One last question for you, Samar, before I let you go, just open-ended, what are you excited about? What are you excited about for 2025? What are you looking forward to either professionally or personally in the world of markets? I know you really like markets. So what keeps you going? What gets you excited for 2025? This is going to sound corny,

but I'm going to go with it. What gets me excited is, hope and optimism. And I have a lot of that right now. I think that 24, 23 was a tough year. I think you and I saw each other at... At permissionless. Yeah, at permissionless where you actually, like, had a fight with someone, right? Like... Yeah, I fought a guy. Yeah. Okay. So, so, like, you guys are like, there is some branding there, but I get it. But I guess we'll say... To be clear, it was a karate combat orchestrated fight between two. consenting adults who agreed to do this inside of a professional environment. Fair enough.

Not just a random fight. I get that. But a lot of the promotional material was like I felt like around this fight. And I just bring that up because there was a lot of anger at the system, like more than I had expected. And that was very, there were a couple of things that were eye opening for me at that conference. That was one of them. Crypto and digital assets. Anger at the system.

What do you mean by that? I think anger at the state of the regulatory environment. Like anger at the idea that it was just like it was a moving target to know what you could do and couldn't do and how do you invest your capital. And I think that's, you know, that's a bad environment for innovation and for growth. But the degree of just kind of the atmospherics around it was a bit diverting from the mission and the goals. So my hope is now we can really focus on the mission and the goals. which is, I believe, to create a more transparent and accessible, a financial system for, and obviously crypto is way beyond finance. I just live in the financial realm of it. So that's really my hope for

2025. And I think that we are on our way towards doing that. Well, I hope that there are some things that are lining up in the crypto industry and outside of the crypto industry that really can foster that. Some people are calling for a golden age in crypto innovation. We finally have very abundant, very cheap block space. Developing has never been easier. And now, regulatory-wise, we have pretty clear skies. And so hopefully we can put that optimism to some use and kind of get back to exactly what we were saying, which is mission-driven to espouse what is so good about blockchain and crypto and bring this industry into its golden era. So, Samara, thank you so much for joining me on the Bankless podcast today. We really are very honored

to have had you. Thanks a lot for having me. This was fun. Bankless Nation, you guys know the deal. Crypto is risky. You can lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you are with us on the bankless journey. Thanks a lot.