Blockchain technology is often associated with the cryptocurrency universe, and while the latter is widely viewed as the starting point for the former, blockchain is a fast-growing, rapidly evolving concept with applications across a variety of industries.
That expansive usage case is relevant to investors considering blockchain equities and exchange traded funds such as the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC). BLKC follows the Alerian Galaxy Global Blockchain Equity, Trusts and ETPs Index and is home to 55 holdings.
While some of the ETF’s components are direct plays on bitcoin prices and the broader crypto universe, the Invesco fund also offers substantial leverage to blockchain expansion. Some analysts view the financial services industry as prime territory for that expansion.
“Blockchain and digital assets are opening the door to new markets, products, and processes for institutional investors. They’re being used to tackle some key pain points in investment, including the speed with which trades can reach finality, the transparency of trading records for price discovery, and the creation of liquidity for previously illiquid assets,” according to a recent report from Cowen.
BLKC allocates more than 16% of its weight to the financial services sector, and some of the ETF’s holdings from that group certainly fit the bill as “major banks.” That’s pertinent because some of those firms are already embracing blockchain technology.
“Financial institutions realized very quickly that this was transformative technology. More than 40 of the world’s largest banks collaborated on the creation of the world’s first financial services blockchain, R3 Corda. ING and Credit Suisse executed their first blockchain-based securities transactions more than five years ago, and in 2020 JP Morgan executed their first intraday repo settlement on what has now matured into their Onyx Digital Assets platform,” added Cowen.
JPMorgan Chase & Co. (NYSE:JPM) accounts for 1.48% of the BLKC roster. There are other reasons for big banks and other financial services firms to consider blockchain technologies. Those include increased efficiencies, bolstering of tech stacks, and shoring up security — all of which can have material impacts on bottom line growth.
“Regulation is also evolving to meet the needs of this brave new world. The early involvement of banks and financial services ensured that consumer safety was always going to impact the use of blockchain and digital assets. Regulators are starting to make headway in applying existing rules for consumer protection to digital asset businesses. Strong action against money laundering, including the recent breakup of dark web exchanges, has reduced the options for cyber criminals and fraudsters to hide from forensic investigators,” concluded Cowen.
For more news, information, and analysis, visit the Crypto Channel.
VettaFi LLC (“VettaFi”) is the index provider for BLKC, for which it receives an index licensing fee. However, BLKC is not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing or trading of BLKC.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.