In his annual letter to investors on Monday, BlackRock CEO Larry Fink warned that if the U.S. doesn't get its debt under control and deficits keep ballooning, the country risks losing its world reserve currency status to digital assets like bitcoin.

The U.S. has benefitted from the dollar serving as the world's reserve currency for decades, but there's no guarantee that will last forever, Fink wrote — noting that the national debt has grown at three times the pace of GDP since Times Square's debt clock started ticking in 1989.

This year, the U.S. government interest payments will surpass $952 billion to exceed defense spending. If the situation is not rectified, by 2030, mandatory government spending and debt service will consume all federal revenue, creating a permanent deficit, he said.

U.S. federal debt as a percentage of GDP. Image: BlackRock.

"I'm obviously not anti-digital assets," Fink said. "But two things can be true at the same time: Decentralized finance is an extraordinary innovation. It makes markets faster, cheaper, and more transparent. Yet that same innovation could undermine America's economic advantage if investors begin seeing bitcoin as a safer bet than the dollar."

Reflecting on BlackRock's performance over the past year, Fink noted that its U.S. spot Bitcoin exchange-traded fund, IBIT, was the largest ETF launch in history, growing to over $50 billion of assets under management in less than a year. IBIT generated net inflows of $37.4 billion in 2024 and over $40 billion since launch — dominating a market where its closest rival, Fidelity's FBTC, sits on $11.5 billion worth of net inflows, according to data compiled by The Block.

Fink also noted that IBIT was the third-highest asset gatherer in the entire ETF industry, behind only S&P 500 index funds, with more than half of its demand coming from retail investors and three-quarters from those who had never owned an iShares product before. BlackRock has since expanded its bitcoin offering to exchange-traded products in Canada and Europe.

Earlier this year, Fink suggested that if everyone "adopted" the conversation of allocating, for example, 2% to 5% of their assets to bitcoin, the cryptocurrency's price may someday reach as high as $700,000.

Beyond bitcoin, Fink said that tokenization could help move financial markets away from plumbing developed when trading floors still shouted orders and fax machines were at the cutting edge — turning real-world assets like stocks, bonds and real estate into digital tokens tradable online via blockchain technology.

The BlackRock CEO suggested that tokenization is akin to moving from postal services to email for investing, enabling assets to move directly and instantly, sidestepping intermediaries. "Every stock, every bond, every fund — every asset — can be tokenized," Fink said. "If they are, it will revolutionize investing. Markets wouldn't need to close. Transactions that currently take days would clear in seconds. And billions of dollars currently immobilized by settlement delays could be reinvested immediately back into the economy, generating more growth."

Tokenization democratizes investing by enabling fractional ownership, easier shareholder voting and broader access to higher-yield investments, Fink added, making assets accessible to a wider range of investors.

In the letter, Fink also reflected on the historical development of capital markets, noting their role in expanding prosperity and helping individuals build wealth through investments. He discussed the need for further innovation to bridge the gap between public and private markets and emphasized the importance of expanding investment opportunities, including enabling smaller investors to benefit from assets typically reserved for the wealthiest.

Despite acknowledging the current widespread economic anxiety, Fink sought to reassure investors that such periods are not new and, like in the past, the economy will stabilize over time due to human resilience and the strength of capital markets.

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