HSBC is staying away from the cryptocurrency trading game, despite a number of its rivals planning to enter the space.
The bank’s chief executive Noel Quinn said it has no plans to launch a cryptocurrency trading desk or offer exposure to digital assets to its clients, due to the extreme price volatility and lack of transparency they offer.
Quinn’s comments follow a recent move by China, a key market for HSBC, in stepping up its ban on financial institutions providing services to cryptocurrency-related businesses.
Bitcoin took a beating over the weekend as China stepped up its curbs on cryptocurrency trading, falling almost 50% from its April all-time high. Other cryptocurrencies crashed similarly, though trading had somewhat stabilised by mid-morning on 24 May.
“Given the volatility we are not into bitcoin as an asset class, if our clients want to be there then of course they are, but we are not promoting it as an asset class within our wealth management business,” Quinn told Reuters in a 24 May interview.
HSBC’s stance appears in stark contrast to other banks such as Goldman Sachs and Morgan Stanley, both of which have announced plans to offer bitcoin-exposed products to clients.
HSBC had already moved to limit its clients’ access to crypto-exposed stocks such as MicroStrategy, which has bought billions of dollars worth of bitcoin for its corporate treasury. The bank was contacted for comment.
Quinn said the bank was similarly uninterested in stablecoins, a form of cryptocurrency which is pegged to one or more fiat currencies such as the US dollar in a bid to contain its volatility.
“I view bitcoin as more of an asset class than a payments vehicle, with very difficult questions about how to value it on the balance sheet of clients because it is so volatile,” he said.
“Then you get to stablecoins which do have some reserve backing behind them to address the stored value concerns, but it depends on who the sponsoring organisation is plus the structure and accessibility of the reserve.”
Writing in a note to clients a few days earlier, Goldman’s head of digital assets Michael McDermott said it was the ‘fear of missing out’ (FOMO) that was pushing the entry of banks and institutional investors into the crypto space.
“If you’re an asset manager or running a macro fund and your closest rivals are all investing and seeing material returns, your investors will naturally wonder why you are not investing,” McDermott said on 21 May.
“But I see investor interest in crypto enduring; we’ve crossed the Rubicon in terms of institutional buy-in, and there is much greater value in the space than there was three or four years ago.”
To contact the author of this story with feedback or news, email Emily Nicolle