BlackRock CEO Speaks: Digital Assets May Reshape the Global Financial Landscape

Larry Fink, the CEO of the global asset management giant BlackRock, recently released a 27-page annual letter to investors that covers several important topics, from U.S. debt risks to the revolution of digital assets. Fink unusually issued a warning that if the U.S. cannot curb the rising debt and fiscal deficit, the long-standing status of the dollar as the global reserve currency could be replaced by emerging digital assets such as Bitcoin.

Fink pointed out that the United States has benefited from the dollar's status as the global reserve currency for many years, but this advantage is not eternal. Since 1989, the growth rate of U.S. national debt has been three times that of GDP. This year alone, interest payments will exceed $952 billion, surpassing defense spending. By 2030, mandatory government spending and debt repayments will consume all federal revenue, resulting in a long-term deficit.

While reminding of the risks of traditional finance, Fink also clearly stated that he does not oppose the development of digital assets. He believes that decentralized finance is a significant innovation that makes the market faster, cheaper, and more transparent. However, it is this very innovation that could undermine the economic advantages of the United States, especially if investors begin to perceive Bitcoin as safer than the US dollar.

Fink also introduced the success of the Bitcoin ETF launched by BlackRock in the United States, which has become one of the largest initial public offerings of exchange-traded products in history, with assets under management exceeding $50 billion in less than a year. This product ranks third in asset attractiveness in the ETF industry, only behind the S&P 500 index fund. Notably, more than half of the demand came from retail investors, and three-quarters came from new clients who had not previously held BlackRock products.

When it comes to tokenization technology, Fink describes it as a key force reshaping financial infrastructure. He believes that the current global flow of funds system still relies on outdated "financial pipes", which are inefficient and not suited to modern demands. In contrast, tokenization is like email in the financial world, enabling direct, real-time circulation of assets, bypassing all intermediaries.

Fink further explained how tokenization profoundly changes the financial ecosystem. He pointed out that tokenization can transform physical assets (such as stocks, bonds, and real estate) into digital tokens that can be traded online. Each token represents ownership of a specific asset, similar to a digital certificate of title. These tokens are securely stored on the blockchain, making buying, selling, and transferring instantaneous, without the cumbersome paperwork and waiting times.

The advantages of tokenization also include achieving the "democratization" of investment. It allows assets to be divided into smaller shares, lowering the participation threshold and making traditionally high-threshold assets (such as private real estate and private equity) accessible to a broader group of investors. In addition, tokenization can simplify the shareholder voting process, making it easier for investors to exercise their ownership rights.

However, Fink also pointed out a key challenge facing the widespread adoption of tokenization: identity verification. He believes that in the future, tokenized funds could become a routine allocation for investors, similar to ETFs, but only if the identity authentication issue is resolved. He mentioned that India has made breakthroughs in this area, with over 90% of Indians now able to securely complete transaction verification using their smartphones.

Overall, Fink's annual letter not only warns of the potential risks to the dollar's global reserve status but also envisions the transformations that financial technology innovation may bring. From the tokenization of capital markets to the development of digital identity systems, Fink reveals the limitations of the current financial system while highlighting new directions that technology and institutional innovation may open up.