Larry Fink (BlackRock Inc.’s chief executive) said that the Russia-Ukraine conflict could lead to an acceleration of digital currencies as a way to settle international transactions. This is because the conflict has reshaped the globalization drive over the past three decades.
Fink wrote to shareholders of the largest asset manager in the world, stating that the war would force countries to reassess their currency dependencies and that BlackRock was looking into digital currencies and stablecoins because of the increased client interest.
He said that a global digital payment system can be designed to improve international transaction settlement and reduce the risk of money laundering or corruption.
This seemed to be a change from Fink’s May 2012 comments, in which Fink expressed concerns about volatility and stated that it was too early for him to say whether cryptocurrencies are speculative trading tools.
The chairman and CEO of the $10 Trillion asset manager, said that the Russia-Ukraine crisis had ended globalization efforts over the last 30 years.
BlackRock said that access to the global capital markets was a privilege, not a right, and added that it had stopped buying Russian securities from its active index portfolios after Moscow’s invasion.
“Over the last few weeks, I have spoken with countless stakeholders, including clients and employees who all want to know what can be done to stop capital being sent to Russia. Fink stated that this is Fink’s definition of fiduciary duty.
According to the assets manager, BlackRock Inc’s total exposure to Russia by clients had fallen to $1 billion in the month before Moscow invaded Ukraine. This was $18 billion prior to Western sanctions and the closing of the Russian stock exchange.
Russia describes its actions in Ukraine as a “special operation.”
The conflict’s effect on global supply chains, already hit over the past two years by the coronavirus crises, is expected to increase inflationary pressures. Global central banks are being pushed to tighten monetary policy and reverse COVID-19-driven accommodating measures.
Fink stated that “while companies’ and consumers’ financial positions are strong today, which gives them more cushion to weather these problems, a large-scale restructuring of supply chains will inherently cause inflation.”
He stated that central banks are faced with a dilemma unlike any other in recent decades. They must choose whether to live with high inflation or slow down economic activity to limit price pressures.
As a result of sanctions against Moscow, energy prices have jumped. Companies and countries were forced to reassess their supply chains and try to decrease dependence on Russian commodities.
Fink stated that energy security is now a top priority in the world’s energy transition.
