Just as mobile banking revolutionized our relationship with our money and led to a plethora of new tools for management and investing, the proliferation of crypto and blockchain technologies have opened up all manner of new investment opportunities that go far beyond what early Bitcoin adopters could’ve imagined.
Oftentimes, even a revolutionary technological advancement is only the beginning of something bigger. Such was the case in the early 2000s, when the Royal Bank of Scotland released a mobile-banking app that precipitated not only the age of mobile banking, but a proliferation of other apps designed to give people easier access to and control over their money. The same phenomenon has happened since the Bitcoin whitepaper appeared: Beginning with a single game-changer, Bitcoin, the crypto space has blossomed with all manner of innovations: Not just other currencies like Ether, but entirely new ways of building, managing, and investing wealth.
We’ll learn about the creation of the very first mobile banking app. Then, along with BlackRock’s Samara Cohen, we’ll dive into the world of new opportunities that crypto has opened up, from ETH and the Ethereum network, to smart contracts, tokenization, and the recent wave of crypto ETPs that have brought even more investors into the crypto space.
So the other week, I happened to be cleaning out my purse.
I pulled out some spare keys, a pack of gum… Finally, I turned the whole thing inside out. You know what fell out? My checkbook.
I literally had to dust it off.
I remembered how, not too long ago, at the end of each month I’d have to clear off the kitchen table and make room for a big stack of bills, a checkbook and some scratch paper. And I’d tally up how much I owed…
If I forgot to carry the two or my rent check got lost in the mail? That tiny mistake could hurt my credit, maybe worse. If I wanted to open a new account or get financial planning advice? That could take days or weeks to sort out. Long story short, there were all sorts of hurdles to overcome just to do what I wanted to do with my own money.
Today, I can breathe easier.
I have my bills set to auto-pay. And I can check my bank balance in real time on my phone. I can even manage my investments without ever setting foot in a bank or going through an intermediary.
All of this just goes to show how technology can really upend the financial status quo.
Now, we’re looking at another seismic shift.
As crypto and blockchain technology have evolved, they’ve opened up a whole universe of options for investing and building businesses. Once again changing how people - both retail and institutional investors - handle money.
Welcome back to Evolving Money, from Coinbase and Bloomberg Media Studios. I’m your host, Maggie Lake.
On this podcast, we take a different look at cryptocurrency. It’s been cast as a radical departure for the monetary system. But what if it isn’t radical at all – just the next logical evolution of how we pay for things and store long-term value? Along the way, we’ll explore how money has changed over the centuries, and look for lessons that might predict its next evolution.
Not so long ago, the advent of the smartphone and mobile banking changed everything about how we deal with our money. With blockchain technology now fueling a similar revolution, what new opportunities will it unlock for investors?
I’ll talk to Samara Cohen, Chief Investment Officer of ETFs and Index Investments at BlackRock, who’s helping educate investors on cryptocurrencies and harness their power. She’ll talk us through three promising avenues for investment that go beyond just holding Bitcoin.
But first, we’ll hear the story of how the mobile finance revolution began, opening the door for a host of new products and forever altering the way we handle our money.
TIM FRANCE-MASSEY: Apple had just launched the iPhone in 2007.
That’s Tim France-Massey.
Today, Tim is the Transformation Programme Director for Royal Navy, at Capita Limited.
But back when the iPhone launched, he worked for the Royal Bank of Scotland.
TIM FRANCE-MASSEY: Not that many people had them. It was the early adopters that had them. I could see by talking to my colleagues in the internet banking part of Royal Bank of Scotland, that we were starting to see a few tens of thousands of customers who had iPhones trying to access their internet banking through their mobile Safari browser on their new, shiny iPhone.
But it’s not like these phones had all the banking apps we have now. The whole experience was pretty clunky. And on top of that, banks charged for the service. Around the same time, RBS watched as big social media platforms started launching apps on the iPhone.
TIM FRANCE-MASSEY: Millions of downloads per week over a few weeks. And Royal Bank of Scotland said, well, maybe there's an opportunity here. We could grow further globally through this new technology of mobile. Nobody's launched an iPhone mobile banking app yet. Let's be the first. Let's try and be the first to do that.
With the 2008 financial collapse barely in the rearview, customer’s trust in banks was at an all-time low. RBS felt it was imperative to meet customers where they were — on their phones.
In the Fall of 2009, RBS began ramping up to launch. They planned to text a link to all of their customers, making it as easy as possible to download the app. And internally, they estimated they could get about 80,000 downloads in the first week. If that.
TIM FRANCE-MASSEY: I remember somebody senior in marketing telling me, Oh, you'll never do that. If you do that, that’ll be the most successful product in the history of the bank.
But Tim knew they had something special. When the product launched in November 2009, RBS reached 80,000 downloads … by the end of the first day.
TIM FRANCE-MASSEY: The app is shooting up the app store. At one point we got to number four on the overall UK app downloads.
Within a few weeks, they had hundreds of thousands of users. As people flocked to mobile banking, RBS had to scramble to make sure it had enough server power to keep the app running.
TIM FRANCE-MASSEY: It was just the fastest rollercoaster ride that I've ever been on.
In May 2011, RBS launched a new version of the mobile app, one that allowed users to transfer money between accounts. In the first six months, more than 1 million users downloaded it, transferring more than 1 billion pounds via their phones.
A decade later, almost three quarters of US consumers say they prefer to manage all of their finances through a mobile app.
TIM FRANCE-MASSEY: Certainly the consumers benefited because it's much more convenient. You can just sort of be on a conference call and doing your banking on your phone at the same time. You can do it on the go.
Having banking apps on our phones made it much easier to navigate the financial world. Today, we don’t just use them to check our balance; they cater to every need you could imagine.
And the same can be said for crypto investing. What started with bitcoin has evolved into a whole universe of trading opportunities.
SAMARA COHEN: I've been interested in crypto since, you know, really the early years, particularly in the post financial crisis years.
That’s Samara Cohen, Chief Investment Officer of ETFs and Index Investments at BlackRock.
SAMARA COHEN: We were looking at ways to modernize markets infrastructure. Because there was a huge wave of financial regulation coming in response to the financial crisis of 2008 that required creating more transparency, more reporting, more clearing, reductions in counterparty risk. A lot of things that in theory, it seemed, blockchain technology might have relevance and application to.
Blockchains and tokenization could facilitate, record, and streamline financial transactions — once both parties understood how to harness the new technology.
MAGGIE LAKE: What do you believe was the tipping point that got so many of your colleagues interested in learning about digital assets.
SAMARA COHEN: I think the tipping point was actually hiring a couple of digital assets experts to come into the firm and help educate us. Primarily by being translators. We needed help doing that so that we could get a sense of what the relevance was of this ecosystem as it was unfolding.
Once her team understood the potential impact of these innovations, Samara’s task was to figure out how to use them to help investors.
SAMARA COHEN: We would go away into different working groups to come up with pilots and proofs of concept and think about, okay, “Are there blockchain technology applications to our different businesses? What are the frictions that exist?”
And through that kind of body of work and hands-on engagement, we developed the ability to work with each other and start thinking much more strategically about ways we might participate.
Today, Samara is helping to bridge the gap between crypto and traditional finance.
SAMARA COHEN: I feel like I spend a lot of my time, increasingly, trying to create a bridge between the two universes because that integration of the best that's offered by blockchain technology and crypto, and also the best that's offered by the traditional financial ecosystem really creates the optimal outcomes for investors. And a lot of times that comes down to learning how to speak the same language and defining our terms.
If you were to ask the average person on the street for their thoughts on crypto, their answer would almost certainly include the word “Bitcoin.” But many people – serious investors included – still aren’t familiar with how to invest in crypto beyond that single currency.
SAMARA COHEN: Crypto is actually a really very broad category. Let's unpack what you're talking about when you say crypto, what does that mean to you and take it piece by piece.
Samara says that among the many options, there are three chief avenues investors might consider. First off, of course, they can buy the actual cryptocurrencies themselves.
Second, they can invest through crypto ETPs, or Exchange-Traded products – what most of us refer to as ETFs. And third, they can buy tokenized assets. Digital tokens which exist on a blockchain and represent other digital or physical assets.
First, let’s look at cryptocurrencies. Again, many think of Bitcoin as the cryptocurrency but in reality there’s a bunch of other cryptocurrencies out there. Samara says it’s important to consider what each type of currency brings to a portfolio.
SAMARA COHEN: So then the question is, what's the nature of the asset? What are its fundamental characteristics? What will drive appreciation or depreciation? What are its liquidity characteristics? What's its volatility characteristics? And how will it play in a diversified portfolio?
Take Ether, a cryptocurrency that’s been steadily gaining traction. While Bitcoin was designed as a peer-to-peer payments system, and has evolved into a store of value for many investors, Ether is different.
Ether was created to power the Ethereum network – that’s a blockchain platform where people can build programs and apps. That network provides the infrastructure for smart contracts. Quick refresher: smart contracts are programs that enforce the terms of an agreement automatically and instantly and leave a permanent record of the transaction on the blockchain.
Some major players have already adopted smart contracts using Ethereum and other blockchains. Last year, Walmart used smart contracts to bring transparency to its food supply chain. In California it was the DMV that tapped into blockchain technology to digitize more than 42 million car titles, giving drivers a safe, more efficient alternative to standing in that dreaded DMV line.
And the list goes on. IBM, Microsoft, and Home Depot are just a few other household names that have adopted smart contracts. A recent survey by Deloitte showed that 72% of executives believe smart contracts will play a significant role in the future of business.
And, for individual investors, smart contracts make it easier to trade on decentralized exchanges — where different cryptocurrencies are traded securely without any organizational gatekeepers. Today, Ether is used to power everything from decentralized finance apps, to NFT marketplaces, to buying and selling carbon credits.
SAMARA COHEN: So I think anybody who is interested around blockchain technology and its applications to finance is, you know, immediately drawn to the Ethereum ecosystem.
As investors learn about Ether’s utility, they’re using it more. It’s now the second biggest crypto asset, behind Bitcoin.
But investing in Ether, Bitcoin, and other cryptocurrencies as individual assets, is still only one of the many paths available to the crypto-curious investor. Another new opportunity that’s only recently opened up? Investing in crypto ETPs, or Exchange-Traded Products.
You’re probably familiar with ETFs, Exchange-Traded Funds, which are a type of ETP.
SAMARA COHEN: Part of what has really brought investors into exchange traded products over the last 20 years has been their transparency, their accessibility.
With ETFs, investors can invest in and trade a basket of securities, just as easily as they can an individual stock. That ease of access hasn’t always been available to crypto investors, especially those who want to include both traditional and crypto assets in their portfolios. That’s partly because buying and selling crypto often happens outside of the mainstream financial system.
SAMARA COHEN: Investors who want access to those markets have found it complicated to try to run portfolios on two different sets of rails.
Not too long ago, it might have seemed daunting to integrate a digital currency into an existing portfolio of traditional assets. But that’s changing.
In January 2024, the SEC approved ETPs that held Bitcoin. Then in July, Ethereum ETPs received approval, giving investors access to Bitcoin and Ether on traditional stock exchanges.
SAMARA COHEN: For investors who are interested in investing in Bitcoin or Ethereum, the approvals have given them the ability to do that in their kind of more familiar ETP ecosystem. For crypto investors, the ETP approvals were a very important step forward.
With the introduction of Ether and Bitcoin ETPs, investors can bring crypto into their portfolios in a way that feels familiar, using traditional investment tools. Putting their money behind crypto, without buying the currency directly, and allowing them to integrate both crypto and traditional assets into their portfolio, seamlessly.
SAMARA COHEN: The idea that you could actually take cryptocurrencies and bring them onto TradFi Rails in order to assess your whole portfolio risk in one place is something that we learned was really important to investors.
These ETPs gave existing crypto investors more ways to expand and grow their investments. But they also brought a wave of new investors into the space. Bitcoin ETPs now account for more than a hundred billion dollars’ worth of assets under management, while Ether has reached 12 billion. And, while there’s certainly been plenty of new individual investors, what’s really noticeable is the institutions that are getting on board.
Once the approvals took effect, it didn’t take long for crypto ETPs to make headlines:
In August, the state of Wisconsin announced that it owned nearly a hundred million dollars’ worth of BlackRock’s Spot Bitcoin ETP. There was also Emory University: 15 million dollars’ worth of Bitcoin ETP holdings, announced in October.
Last November, the state of Michigan made a splash when its pension fund disclosed they had invested almost 20 million dollars in both Bitcoin and Ether.
These aren’t just day traders buying crypto. This is the State of Michigan we’re talking about. And these are just a few of an ever-growing list of institutional investors entering the space.
That kind of mainstream adoption underlines how expanded access to cryptocurrencies through traditional financial tools is creating opportunities and returns on a new scale.
And that brings us to the third opportunity for investors looking to expand their crypto investment strategy: Tokenized assets. They’re digital representations of a real world asset — anything from real estate to intellectual property, or even shares in a mutual fund — that exist on a blockchain network. And they’ve emerged as the latest option for investors looking to harness the benefits of blockchain technology in their portfolios.
MAGGIE LAKE: How do you see the role of tokenized assets in a portfolio?
SAMARA COHEN: If I think about just portfolio construction, asset allocation, trading, real world frictions with the existing investable assets that are out there today, tokenization might reduce a lot of costs and frictions associated with managing an investment portfolio. And of course, if you lower costs and frictions you increase returns.
One example? Tokenized money market funds. Inefficiencies and counterparty risks have long plagued MMF managers. But tokenized MMFs, like BlackRock’s, have the potential to enable faster, seamless management of treasury positions.
Just as RBS’ app opened the floodgates for a whole world of mobile banking, we may again be seeing how a single breakthrough can unlock all manner of benefits.
SAMARA COHEN: It's a technology that has the potential to make living your financial life a lot easier, less complicated, and by extension less expensive so that people can do better as investors.
As they begin to bridge the knowledge gap between traditional investment tools and cutting edge financial technologies, institutional investors of all stripes are realizing how much their portfolios stand to benefit. All indicators suggest that investors will continue exploring new cryptocurrencies, and investing in ETPs and tokenized assets.
SAMARA COHEN: For me, 2024 has been a year of bridge building. We have major bridges that have been tested and built and succeeded. I think that's a really promising start to what can hopefully be a more integrated ecosystem between the two.
Not even Steve Jobs could have predicted the way the iPhone would change the financial world. And now, as investors warm to the idea of investing in cryptocurrency and blockchain technology, we’re seeing the rise of a new set of financial tools and services that are, once again, changing how we handle money.
Someday, we may just look back on this moment, as another key inflection point in our money’s history.
Thank you to Samara Cohen and Tim France-Massey.
This is Evolving Money, a podcast from Coinbase and Bloomberg Media Studios.
If you like what you hear, subscribe and leave us a review.
I’m Maggie Lake, thanks for listening.