BlackRock says cryptocurrencies could become “more widely used” in future

on Feb 28, 2018

The world’s largest asset manager, BlackRock, sees cryptocurrencies potentially having a larger role in the future, but it believes that at the moment thee assets are still too risky to be integrated into mainstream investment portfolios.

In its Global Weekly Commentary, published on Monday, the company also acknowledged blockchain’s potential to become a “disruptive” technology, but added that the technology needed to overcome “significant hurdles”

“We see cryptocurrencies potentially becoming more widely used in the future as the market matures,” BlackRock’s chief investment officer Richard Turnill wrote in the commentary. “Yet for now we believe they should only be considered by those who can stomach potentially complete losses. Similarly, blockchain needs to overcome significant hurdles to reach its promising future,” he added, as quoted by industry website Coindesk.

Turnill went on to highlight some of the major risk factors associated with cryptocurrencies – their extremely high volatility and the fact that they are unregulated. “The volatility of the cryptocurrencies makes the gyrations in the U.S. equity market during the global financial crisis almost look placid,” he wrote.

With regards to blockchain, the technology that underpins the majority of existing cryptocurrency, Turnill said that it had “disruptive potential” for industries ranging from “logistics and pharmaceuticals to financial service”, but cautioned that the technology’s adoption would not be seamless and would have to involve regulators and central banks. To illustrate this, he pointed to how the financial services industry could see significant benefits from adopting “a blockchain-based, single shared financial database”. However, “adoption at scale would require a massive shift in software development and a well-constructed maintenance model”, he added.