As the world’s largest asset manager expands its crypto reach, its chief rival has thus far resisted entering the market.
BlackRock has added a layer of credibility to crypto for a segment of investors, given its management of $11.5 trillion in assets. The iShares Bitcoin Trust (IBIT), the fastest-growing ETF of all time, managed nearly $69 billion as of Wednesday.
Yet Vanguard, with its roughly $10 trillion in assets under management, isn’t biting — even as major competitors continue to seek more entry points.
Vanguard was not among the firms lining up to launch the first US spot bitcoin ETFs in January 2024. When those ETFs started trading, the company told Blockworks the funds would not be available for purchase on Vanguard’s brokerage platform.
Roughly six months later, Vanguard similarly blocked the trading of ETFs holding ether.
Read more: Restricting access to growing bitcoin ETFs becoming ‘hard to justify’
Both times, a representative told Blockworks that crypto ETFs “do not align with our [offerings] focused on asset classes such as equities, bonds and cash, which Vanguard views as the building blocks of a well-balanced, long-term investment portfolio.”
They added: “We continuously evaluate our brokerage [offering] and evaluate new product entries to the market.”
A Vanguard spokesperson told Blockworks at the Exchange ETF conference in March that the firm’s view on crypto has not changed. Representatives at the company did not return Blockworks’ newest requests for further comment.
Vanguard rivals flock to crypto
Executives at a number of traditional finance giants have historically been wary of bitcoin and the crypto space more broadly.
Vanguard founder John Bogle told people in 2017 to “avoid bitcoin like the plague.” BlackRock CEO Larry Fink once called bitcoin “an index of money laundering.”
Fink’s view evolved as demand grew, with the BlackRock leader labeling bitcoin (after launching IBIT) as “an asset class that protects you” from economic uncertainty and geopolitical risk. Bogle had no such stance change — at least publicly — before his death in 2019.
Fink has also been adamant about the benefits of blockchain technology, noting in a March letter to shareholders that tokenizing every stock, bond and fund would “revolutionize” investing.
Samara Cohen, BlackRock’s CIO of ETF and Index Investments, told Blockworks co-founder Jason Yanowitz last month that company executives have been “students of crypto for years.”
She added: “What we heard from clients in 2020 and 2021 was really changing from what it had been a few years before in thinking that this actually has a potential role in a diversified portfolio, and why.”
BlackRock launched a private bitcoin trust in 2022 before debuting its spot bitcoin ETF less than two years later. Earlier this year, the firm’s alternatives-focused model portfolios began allocating between 1% and 2% of its assets to IBIT.
Ric Edelman, founder of Edelman Financial Engines and the Digital Assets Council of Financial Professionals, said Vanguard is clearly unmoved by data showing the historical benefit (on risk-adjusted returns) of adding a small single-digit percentage allocation to bitcoin.
“If you fundamentally believe in modern portfolio theory, if you believe in diversification and portfolio rebalancing, then you want assets included that are both volatile and non-correlated,” he said. “Bitcoin is the perfect example of a volatile, non-correlated asset.”
BlackRock is not the only financial titan seeking to capitalize on investor demand for crypto.
State Street Global Advisors — the third-largest fund manager and issuer of the first US ETF in 1993 — is bullish on diversified, actively managed crypto portfolios. The company launched several such funds last year via a partnership with Galaxy Digital.
Fidelity formed a digital assets unit in 2018 and has a bitcoin ETF with roughly $20 billion assets under management. Franklin Templeton has a BTC ETF as well — and, like BlackRock, is in the tokenized money market fund game.
Charles Schwab has not ruled out offering a bitcoin fund. In the meantime, the brokerage titan allows investors to buy and sell crypto ETFs on its platform and has signaled its interest in offering spot crypto trading when more regulatory clarity comes.
Morgan Stanley, too, is reportedly looking into adding crypto trading to its E*Trade platform, though a spokesperson declined to comment.
Read more: Spot crypto trading to become ‘commoditized’ as Wall St. interest persists
Wells Fargo — a firm with no concrete, public crypto plans — still recognizes crypto as a viable asset class. The bank made available unsolicited spot bitcoin ETF purchases to certain clients last year and called digital assets “investable as they continue to evolve” in a March report.
Even JPMorgan Chase CEO Jamie Dimon, who has criticized bitcoin for years, said Monday that clients of the bank will be able to buy bitcoin. He likened buying bitcoin to smoking — saying he doesn’t think you should, but: “I defend your right to buy bitcoin.”
Those comments came a couple days before BTC hit a new all-time high above $111,000.
Outside of bitcoin, Bank of America CEO Brian Moynihan said at the Economic Club of Washington, D.C. in February that the company would enter the stablecoin business if US lawmakers give regulatory approval. Citi analysts’ base-case estimate for the stablecoin market’s size in 2030 is $1.6 trillion — roughly seven times its current size of $230 million.
Vanguard’s choice ‘befuddling’ to some
Edelman argued that Vanguard’s decision to “draw a line in the sand” on crypto products is “bufuddling” and makes no business sense.
“It puts Vanguard in the awkward position of acting as a stepmother dictating behavior of its children, as opposed to a business partner facilitating the ability of their customers to invest as they choose,” he told Blockworks.
Bloomberg Intelligence analyst Eric Balchunas — author of “The Bogle Effect” — said Vanguard has avoided Wall Street scandals over the years and built up perhaps more trust than any other financial services company.
But its decision to block crypto ETFs from trading on its platform seems “nannyish and targeted,” he argued.
“It feels like maybe they’re trying too hard to be the responsible Boy Scout trustworthy person in this case,” Balchunas told me. “I don’t think they need to do that. I think what might even be more trustworthy is to trust their own investors to make the decision.”
Bitwise CIO Matt Hougan said the irony with Vanguard is they’ve been on both sides of the financial innovation curve.
The mainstream asset management industry scoffed when Vanguard introduced index funds in the 1970s, calling such passive vehicles “unAmerican” and “Bogle’s folly.” Balchunas’ book on Bogle chronicles how Vanguard transformed the financial industry in part by lowering fund costs.
On the other hand, Bogle was skeptical of ETFs as iShares and State Street Global Advisors built dominant franchises. The firm has since established itself as a low-cost leader in the category; the Vanguard S&P 500 ETF (VOO) is the world’s largest ETF, with about $660 billion in AUM.
“So they know what it’s like to dismiss an innovation and then realize their mistake,” Hougan said. “And yet, here they are again with crypto.”
Beyond Vanguard’s statements to Blockworks over the last 16 or so months, a January 2024 Q&A with executives Janel Jackson and Andrew Kadjeski provides a bit more color on their thinking.
In the post — titled “No bitcoin ETFs at Vanguard? Here’s why” — Kadjeski notes Vanguard removed access to leveraged and inverse funds on its brokerage platform in 2019.
He says: “These products are often misunderstood and misused by investors and can magnify losses.”
Hougan noted that many platforms indeed initially created gates or educational requirements that made it hard to buy leveraged funds. But it’s not the best analogy, he told Blockworks, given that the compounding effect (and its impact on returns, particularly over the long term) can make such products difficult to understand.
“But a bitcoin ETF is one of the simplest ETFs in the world,” the Bitwise CIO said. “It holds bitcoin, and that’s it. No confusion.”
Hougan added: “There’s a good case to be made for ensuring investors understand the ETFs they buy. But I think platforms make a huge mistake when they start telling investors which ETFs they should or should not own.”
Will they budge?
Vanguard’s leadership is one reason some believe it’ll ultimately choose to jump into the crypto game. CEO Salim Ramji led BlackRock’s ETF business as it prepared to launch IBIT.
Read more: Yes, Vanguard’s new CEO supported BlackRock’s bitcoin ETF launch
Ramji told ETF.com in August that the company would not be launching crypto ETFs. “I’m not going to copy competitors,” he added. “It’s important that a company stay consistent with who they are.”
But positions can change, industry watchers maintain.
“I don’t think, when he joined, he wanted to rock the boat so quickly,” Balchunas said of Ramji.
Edelman said he’s “highly confident” Vanguard will “reverse its policy position” by the end of the decade — ultimately listing these on its platform and offering its own crypto ETFs.
“They will obviously be recognized as a me-too player,” he said. “Nobody who already owns a crypto ETF is going to shift over to theirs unless they offer a compelling reason to do so.”
Offering lower-cost funds could be the way they gain market share, Edelman acknowledged.
The advice and wealth management business Vanguard teased in December could also spur movement on the crypto front, Balchunas argued.
“I would think over time they’re going to get more requests from people who want crypto as part of their portfolio, even if it’s not in a Vanguard ETF,” he said. “Are they going to keep denying them that? I think the desire to grow the advisory business could ultimately make them cave on the brokerage platform thing.”
While Edelman believes consumer demand will push Vanguard to offer their own crypto funds, Balchunas is less sure about that.
The company has avoided launching its own gold ETF, citing its view of focusing on equities, bonds and cash. Still, it allows gold ETFs from BlackRock, SSGA and others to trade on its platform.
Either way, various segment observers agree Vanguard will at least lift the bitcoin ETF ban from its brokerage platform.
Time and competition will be what pushes Vanguard to update its “antiquated, 2013-era view of bitcoin,” Hougan argued.
“They say everyone gets the bitcoin price they deserve,” he noted. “I’d say every brokerage gets the bitcoin entry point it deserves too. But make no mistake, the day is coming.”
Get the news in your inbox. Explore Blockworks newsletters:
