Blackrock and other Wall Street giants are entering a decentralized crypto industry. Will they spoil the party?
BlackRock’s co-founder and CEO, Larry Fink, is increasingly embracing cryptocurrency. In a recent interview, he affirmed that Bitcoin is legitimate and firmly believes that there is a place for cryptocurrency in the average investor’s portfolio.
While it may seem promising to many that cryptocurrency is gaining mainstream acceptance, the cryptocurrency community is also concerned that financial giants like BlackRock, Fidelity, and others may be undermining the idea of decentralizing finance.
Quartz explores whether the fear of the financial giants taking over the decentralized crypto industry is true or not.
What is decentralized finance (DeFi), and what is its purpose?
Decentralized finance, or DeFi, is an integral part of the crypto world that aims to create an open, borderless, and decentralized financial system that operates without relying on traditional finance or centralized intermediaries such as banks or financial institutions. Ultimately, the objective is to limit the power of centralized institutions in determining who has access to financial services and to help billions of unbanked populations around the world.
Financial institutions have jumped into the crypto space
Now, financial institutions such as Blackrock have entered the crypto space. After receiving approval from the Securities and Exchange Commission for spot Bitcoin ETFs in the U.S., BlackRock’s iShares group launched the iShares Bitcoin Trust (IBIT) earlier this year. It is the largest spot Bitcoin exchange-traded fund, holding more than $18 billion in assets. In the near future, the financial giant plans to launch an Ether ETF.
Noelle Acheson, crypto expert and author of the “Crypto is Macro Now” newsletter, believes that the blockchain ecosystem growth will continue whether or not large institutions are involved. That’s because “BlackRock and Fidelity don’t control the development of decentralized services; rather, they complement it,” she told Quartz in an email.
But DeFi needs centralization, too
It is important to note that even though crypto is decentralized, it still relies on certain aspects of centralization, such as crypto exchanges, key players in mining, and core developers who often have control over the software. This kind of traditional financial system or centralization is viewed as necessary for the development of cryptocurrency and blockchain ecosystems.
