BlackRock Chief Executive Larry Fink believes the war between Russia and Ukraine could end up accelerating digital currencies as a tool to settle international transactions, as the conflict challenges the forces that have governed globalization for the past three decades. In a letter to shareholders of the world’s largest asset manager, Fink said the war will push countries to reassess currency dependency, and that BlackRock was looking into digital currencies and stablecoins due to growing interest from clients.
“A carefully designed global digital payments system can improve the settlement of international transactions while reducing the risk of money laundering and corruption,” he said.
The tone seemed to be different from May of last year when Fink raised some concerns around volatility and said it was too early to tell if cryptocurrencies were just a speculative trading tool.
In the letter, Fink also explained that BlackRock had suspended the purchase of any Russian securities in its active index portfolios following Moscow’s invasion of Ukraine.
“Over the past few weeks, I have spoken with countless stakeholders, including our clients and employees, who are seeking to understand what could be done to prevent capital from being deployed in Russia. We believe this is the definition of our fiduciary duty,” Fink said.
BlackRock’s total client exposure to Russia had shrunk to less than $1 billion earlier this month, down from $18 billion before Moscow’s invasion of Ukraine triggered Western sanctions and the close of the Russian stock market, according to figures provided by the asset manager this month.
The impact of the conflict on global supply chains – already hit in the last two years by the coronavirus crisis – is expected to contribute to inflationary pressures that are pushing global central banks to tighten monetary policies and reverse accommodative measures. driven by COVID-19.
“Although corporate and consumer balance sheets are strong today, giving them a greater cushion to weather these headwinds, a large-scale reorientation of supply chains will be inherently inflationary,” Fink said.
He said central banks were grappling with a dilemma they hadn’t faced in decades, having to choose between living with high inflation or curbing economic activity to contain price pressures.
