Blockchain.com: Building Crypto’s Financial Future
- Private company Blockchain.com provides a way for people and institutions to buy, sell and store bitcoins and other digital tokens
- Scottish Mortgage has been a shareholder since 2021
- The crypto company's reputation, resilience and potential to play a disruptive role in finance merit its inclusion in the portfolio
As with any investment, your capital is at risk.
A good reputation is always an asset, but its importance is hard to exaggerate in the world of crypto. The market for bitcoin and other crypto tokens* has swelled to over $3tn, but a series of scams and scandals has rightly put investors on guard. So, it’s little wonder that Blockchain.com’s track record and scale work well to its advantage.
The private company runs one of the world’s oldest and most widely used platforms to store, trade and track cryptocurrencies and explore their underlying technologies. Since its 2011 launch, customers have transacted more than $1tn via the firm, which currently counts 37 million verified users worldwide.
“We build products and tools that make it easy for people to be part of the crypto-financial system,” co-founder and chief executive Peter Smith tells Scottish Mortgage investment manager Tom Slater in the latest edition of the Trust’s Invest in Progress podcast.
Co-Founder and CEO of Blockchain.com, Peter Smith, on how his company has emerged through the crypto storm in a stronger position than before, on the latest episode of Invest in Progress.
Listen to the podcast here.
Smith defines its mission in terms of freedom and choice. The former, he says, is about letting anyone arrange a financial transaction with anyone else. “It doesn’t matter if I’m in Kenya and you’re in South Korea or sitting next to each other, we can economically interact.”
The latter, he adds, is about broadening the range of assets people can own. “The dollar and the pound are relatively stable currencies [but there are] places with much less stable systems, like Uganda, where most banks go bankrupt in a 15-year period and the Ugandan shilling basically inflates away everyone’s net worth.
“One of the problems I wanted to solve was giving everyone, everywhere in the world, the ability to have the same financial access and financial choices that so many of us in the west are blessed to be born with.”
Blockchain.com doesn’t only serve individuals. Since 2017, the firm has also targeted institutional clients, including banks, hedge funds and family offices.
Smith says this side of the market outpaced its consumer counterpart in terms of growth in 2024, though that was likely a temporary phenomenon. In any case, he says, serving both types of clients achieves the same goal.
“At the end of the day, institutions are just collectives of consumers,” he explains. “All of the money eventually comes back to people somewhere, somehow. However long and winding that pathway is.”
Building Trust
Providing easy access is only half the story. Smith acknowledges that in his industry, more than most, trust is “paramount”.
The failure of one of Blockchain.com’s competitors in late 2022 cast a dark cloud over crypto. FTX’s chief executive, Sam Bankman-Fried, was subsequently sentenced to 25 years in jail for stealing $8bn from customers.
“You can quickly lose trust, but you can't quickly build it,” Smith says.
“One of the things that I’m most proud of in my 10-plus years as CEO is that we’ve never broken a trade, we’ve never not honoured a withdrawal.
“In the depths of the [FTX] crisis, we had a lot of customers email us saying: ‘Do you have all our money?’. We actually sent a customer-wide email and said – click this one button, and all your money goes from our custody to your custody.”
He adds that he recognised this could have prompted an “exodus of funds”, but it was more important to retain clients’ confidence.
“About 10 per cent of customers hit that button,” he recalls. “But we got even more money deposited back into the platform as people saw that they could withdraw their money trivially.
“Trust is built slowly by doing the right thing day after day, year after year.”
A tie-up with the Dallas Cowboys American football team demonstrates the advantage of having an outstanding reputation. The deal, signed in 2022, means Blockchain.com's brand is highly visible at sporting events and across advertising.
"It is a pretty powerful endorsement from one of the biggest sports brands in the US," says Smith.
"The National Football League had to approve companies to become sponsors of teams. We’re the only NFL sponsor from the crypto industry. I think half a dozen companies tried."
A New Era
Crypto’s future appears brighter thanks to the White House’s recent change of guard. While Joe Biden’s presidency focused on restrictions and risk mitigation, Donald Trump has pledged to make the US “the crypto capital of the planet” and even suggested building up a “strategic national bitcoin stockpile”.
“It really is a whole new world, a whole new market with the Trump administration,” says Smith.
“I think that you’ll be able to get banking. I think you’ll be able to serve more customers. I think you’ll be able to get away from the patchwork of [state-based] licences that you have today to be a crypto company in the US and towards a federal charter.
“My guess is that it more or less changes almost everything about how the crypto market looks.”
Scottish Mortgage first invested in Blockchain.com in April 2021. About half a year later, the crypto industry entered a severe downturn. Bitcoin tumbled more than 75 per cent against the dollar, and the so-called ‘stablecoin’ Terra collapsed, causing bankruptcies and chaos, in addition to FTX’s blow-up.
Blockchain.com demonstrated strong resilience in its handling of this turmoil. Scottish Mortgage has since participated in two more funding rounds. At 2024’s end, the holding represented about 1 per cent of the Trust’s portfolio and is one of its 10 largest private companies.
“It's not even that many of them failed, it’s most,” Smith remarks of the crypto casualties that have amassed over the years. “When we look at it statistically, it's like seven out of 10.
“We have managed to survive three of these crypto winters for a few reasons. The first is that we’re very committed to the long term.
“A lot of the companies that you see go bankrupt are really doing short-term things, trying to get rich quickly, trying to grow too fast. We are very, very long-term oriented – that’s something that we share a lot in common with Baillie Gifford.
“The second thing is that we were very fortunate to have great people around us in terms of the board, really experienced folks who know a lot about risk management.
“The third thing is that a lot of times, the reaction from the folks that failed was far too slow. They were too slow to cut costs, too slow to cut risk.
“We had the benefit of having lived through these before, and so we knew as soon as things looked darker than expected that we needed to be incredibly aggressive about responding to it.”
The shakeout arguably left the company in a fitter state and with less competition as it headed into the subsequent upturn. And, as manager Tom Slater reflects at the podcast’s conclusion, Blockchain.com’s investment appeal remains its potential to “produce extreme returns” by “building the financial infrastructure of the future”.
* In simple terms, cryptocurrencies and other crypto assets are cryptographically secured digital tokens representing real-world value operated via a blockchain-based, distributed ledger rather than a central database. Blockchain.com has a primer on bitcoin and other cryptocurrencies on its site.
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