Banking & Finance

Global cooperation can bring out the real advantages of digital currencies, says BlackRock’s Larry Fink

The chairman of the world’s largest money manager says the currencies are being used primarily for illicit activities, but if a global system for their use can be developed, the benefits to the financial community will be great

PUBLISHED : Thursday, 07 September, 2017, 9:13pm
UPDATED : Thursday, 07 September, 2017, 11:05pm

Digital currencies are the way of the future and will prove a boon for the global financial system, but at present they are primarily being used to process illicit funds, and systems need to be developed to bring out their true advantages, according to Larry Fink, chairman and chief executive of BlackRock, the world’s largest money manager.

In an exclusive interview with the South China Morning Post, Fink said that global cooperation was the way forward for the development of digital currencies. BlackRock is an investor in a number of digital currency projects, and Fink said the transparency of virtual money could actually be a help in reducing its use in illegal acts.

“We are a huge believer in the eventuality of a digitally based currency,” Fink said. “It would reduce all money laundering if done well, and it would certainly save a great deal of money if we had a global digitised system for all financial transactions ... but it is not going to be a reality for a number of years.”

Digital currencies and the question of how to regulate them are back in the spotlight this week after the People’s Bank of China banned initial coin offerings – a method by which founders of projects using digital currencies raise funds – and said that 90 per cent of ICOs carried out in China had been fraudulent.

A day later, Hong Kong’s Securities and Futures Commission put market participants on notice that some of their activities may be regulated in its own statement in response.

Regulators in Asia have so far been adopting different approaches when it comes to digital currencies, although some companies have begun working together to create systems for virtual money: for example HSBC and five other banks said last week they would join a UBS-led project to develop a so called utility settlement coin that they hope would make it easier for central banks to issue virtual currencies.

Some experts said regulators may follow that lead.

“We would not be surprised if regulators around the world are looking to each other in order to consider their own regulatory approaches,” said Ian Wood, a Hong Kong-based partner at law firm Simmons and Simmons.

Fink said that the development of a digital currency has to be done cooperatively, country by country.

“Unless there are checks and balances and a true financial system which would be regulated, I don’t think [digital currencies can be used in a non-illicit way].

“This is going to be the debate: how is [that system] going to be created,” he said.

He added that while digital currencies were being used for illegal transactions, the concept of the currencies was also conversely the way to solve that problem.

“We should not think that this has just started happening; there were other ways of illicit transactions happening before cryptocurrencies. It is just becoming more visible, and it’s being rooted out. This is the fantastic nature of what technology is doing,” he said.

“I think it’s fantastic that more things are more transparent and that we can see this happening.”