Tag: Morgan Stanley

Top global banks crash crypto party, invest heavily in blockchain, currency firms, BFSI News, ET BFSI

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Despite being very vocal about how bad Bitcoin supposedly is, top global can’t ignore the potential revenue streams and importance of having a strong strategic position in the crypto economy.

Most major banks including Standard Chartered, Barclays, Citigroup, Goldman Sachs are investing in crypto and blockchain-related companies in 2021.

Out of the top 100 banks by assets under management, 55 have invested in cryptocurrency and/or blockchain-related companies. Either directly, or through subsidiaries, according to Block Data.

The most active investors based on the number of investments in blockchain companies are Barclays (19), Citigroup (9), Goldman Sachs (8), J.P. Morgan Chase (7) and BNP Paribas (6).

The investors active in the biggest funding rounds are Standard Chartered ($380 million in 6 rounds), BNY Mellon ($320.69 million in 5 rounds), Citigroup ($279.49 million in 9 rounds), UBS Group ($266.2 million in five rounds) and BNP Paribas ($236.05 million in 9 rounds).

Where are they investing?

About 23 of the top 100 banks by assets under management are building custody solutions, or investing in the companies that provide them.

Custodians offer financial services to look after their clients’ funds, for a fee. They either build their own technology to offer this service, or use a technology provider whose solutions they can integrate into their own systems.

Why are banks investing in cryptos

Seeing cryptocurrency exchanges with a fraction of their staff become substantially more profitable or valuable than many banks. This started as early as 2018, when Binance, the leading exchange at the time, recorded $54 million more profit than Deutsche Bank, with just 200 vs 100,000 employees. More recently, Coinbase’s valuation was higher than Goldman Sachs, with just 4% of their employees.

Countless requests from their clients to provide Bitcoin solutions along with a change in regulations in 2020 that allows banks to offer crypto custody solutions is also among the reasons for banks to turn to cryptos.

The investments

Standard Chartered has invested $380 million via 6 rounds in firms including blockchain network Ripple, whose XRP token has a capitalisation of around $48 billion. It’s also an investor in Cobalt, a trading technology provider based in the UK. BNY has put money in Fireblocks, whose platform allows financial institutions to issue, move and store cryptocurrencies.

Citibank has invested $279 million in 9 rounds. It has put money in SETL, whose ledger technology is used to move cash and other assets.

UBS, with $266 million and 2 rounds, is an investor in Axoni, whose technology is used to modernize infrastructure in capital markets.

BNP Paribas has invested $236 million in 9 rounds and was developing real-time trade and settlement applications using smart contracts based on the DAML programming language with Digital Asset.

Morgan Stanley with $234 million with 3 investments has invested in NYDIG, a crypto custody firm and the bitcoin subsidiary of Stone Ridge, a $10 billion alternative asset manager.

JP Morgan Chase has bet $206 million via seven rounds and has investments in ConsenSys, an ethereum software company.

Goldman Sachs has put $204 million through eight investments, and its investee firms include Coin Metrics, a provider of blockchain data to institutional clients.

MUFG has put $185 million in six investment rounds in firms including Coinbase, the US cryptocurrency exchange that went public in April, and in Bitflyer, a Tokyo-based cryptocurrency exchange.

ING has bet $170 million spread across 6 investments and has backed HQLAx, a blockchain liquidity management platform.



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HDFC Bank’s AT1 bonds get Moody’s Ba3 rating, BFSI News, ET BFSI

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MUMBAI: HDFC Bank‘s proposed Additional Tier 1 (AT1) bonds have been rated Ba3, three notches below their deposit ratings by Moody’s, with limited likelihood of any rating upgrade in the next 12-18 months due to possible weakness in sovereign rating and the likelihood of rising bad assets in the Indian financial system.

The bank will be the first private sector lender to offer those quasi-equity securities offshore if it finally launches the overseas sale that is expected to open for subscription in the next 7 days.

HDFC Bank will likely set a benchmark for many other local lenders including Union Bank of India, State Bank of India and Axis Bank.

S&P is also expected to come out with a similar rating grade for HDFC Bank’s AT1 series.

The initial guidance is likely to be less than 4 per cent, although it could finally settle anything between 3.5 per cent and 4 per cent, said people familiar with the matter. The size of the issue is expected to be in the range of $500 million to $1 billion depending on investor demand, ET reported on July 29.

“Roadshows have just begun across the world,” one of the persons cited above said.

In between, there were hard negotiations for the pricing particularly after a Thai bank raised AT1 at about 4 per cent two weeks ago.

The borrower is actually looking for 3.5 per cent, which looks tough. Still, there will be good demand for any paper series, branded with the HDFC mark, dealers said.

HDFC Bank and individual investment bankers could not be contacted immediately for comments.

Nearly a dozen banks have been appointed to help the proposed bond sale. Those banks include Barclays, Bank of America, Citi, HSBC, JP Morgan, Standard Chartered, MUFG, Sofgen, BNP Paribas and Morgan Stanley.

AT1, also known as perpetual bonds, add to banks’ capital base unlike perpetual papers issued by any corporate. Such securities do not have any fixed maturity but generally have a five-year call option that allows an exit route for investors.

“The Ba3 (hyb) rating is three notches below HDFC Bank’s baa3 Baseline Credit Assessment (BCA) and Adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability,” Moody’s said in a report Monday.

The principal and any accrued but unpaid distributions on these capital securities would be written down, partially or in full, if HDFC Bank’s common equity tier 1 (CET1) ratio is at or below 5.5 per cent any time prior to 1 October 2021, and 6.125 per cent from and including 1st October, 2021.

In such a scenario, the write-down may be temporary, and the amount could be reinstated subject to the Reserve Bank of India‘s (RBI) conditions, Moody’s said.

“A lowering of HDFC Bank’s BCA (Baseline Credit Assessment) will lead to a rating downgrade of the proposed AT1 securities,” Moody’s added.



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Coindesk, BFSI News, ET BFSI

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Goldman Sachs Group Inc’s prime brokerage division is clearing and settling cryptocurrency exchange-traded products (ETPs) for some of its European hedge fund clients, Coindesk reported on Friday, citing people familiar with the matter.

The services are currently being offered to a limited number of clients and the bank is considering rolling them out for a broader customer base, the report said.

Goldman Sachs declined to comment on the matter.

The U.S. lender in March restarted its cryptocurrency desk amid growing interest by institutions in bitcoin, and said it was looking at ways to cater to a surge in demand to own and invest in the most popular cryptocurrency.

Goldman Sachs is one of several mainstream financial firms that has dived into the crypto space, despite wild price swings and widening regulatory crackdown on the digital assets.

Rival banks Morgan Stanley and JPMorgan Chase & Co have also started giving clients access to crypto funds, according to media reports.



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Global big banks plot back-to-office plans as vaccines roll out, BFSI News, ET BFSI

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The biggest banks in the world plan to re-open their offices, emboldened by aggressive vaccination drives and falling COVID-19 cases in major financial hubs, after sending most employees home early last year to help stem the spread of the coronavirus.

Banks globally are adopting different methods to ensure a successful back-to-office plan including hybrid working models and vaccination drives.

Here is the state of play with back-to-office plans in various regions:

UNITED STATES

Wells Fargo & Co

The bank said in March it plans to start bringing workers back to its offices after Labor Day due to the increasing availability of vaccines. The company is evaluating whether to allow certain businesses or functional subgroups in the U.S. to return to the workplace before Labor Day.

Goldman Sachs Group Inc

The bank planned to bring U.S. employees back to the office by mid-June.

JPMorgan Chase & Co

The largest U.S. bank will bring its employees in the United States back to the office on a rotational basis from July and plans to maintain a 50% occupancy cap during the return-to-office phase.

The bank also plans to step up the return of all of its employees in England to working at least part of their week in its offices from June 21.

Citigroup Inc

CEO Jane Fraser said in a memo in March that post-pandemic, most of the employees would be able to work in a “hybrid” setting, allowing them to work from home for up to two days a week.

Morgan Stanley

The bank’s chief executive officer, James Gorman, said if most employees are not back to work at the bank’s Manhattan headquarters in September, he will be “very disappointed”.

Gorman said his bank’s policy will vary by location, noting the firm’s 2,000 employees in India will not return to offices this year.

The bank’s staff and clients will not be allowed to enter its New York offices if they are not fully vaccinated, according to a source familiar with the matter. Employees, clients, and visitors will be required to attest to being fully vaccinated to access the bank’s offices in New York and Westchester, the source said.

Bank of America Corp

The lender expects all of its vaccinated employees to return to the office after Labor Day in early September, and will then focus on developing plans to bring back unvaccinated workers to its sites, Chief Executive Officer Brian Moynihan told https://bloom.bg/3gyALn3 Bloomberg News in an interview.

UNITED KINGDOM

Barclays

CEO Jes Staley has said the bank will adopt a hybrid working model and will reduce its real estate footprint but maintain its main offices in London and New York.

HSBC Holdings

HSBC has said it plans to cut its global office footprint by around 40% as it moves to a hybrid working model for most employees. The lender moved 1,200 call center staff in Britain to permanent home working contracts, Reuters reported in April, going further than some rivals in cementing changes to working patterns.

Lloyds Banking Group

Britain’s biggest domestic bank is hoping to resume office-based trials and experiments with around 5,000 of its staff this summer, once government restrictions allow. The lender has said it plans to cut 20% of its office space over two years.

Standard Chartered

StanChart said it will make permanent the flexible working arrangements introduced during the pandemic, and that it could cut a third of its office space in the next three to four years.

NatWest

CEO Alison Rose has said the bank is likely to adopt a hybrid working model, but has stressed offices will remain important as a place to bring people together to collaborate.

GERMANY

Deutsche Bank

Deutsche Bank in London plans to bring more staff back from June 21, assuming the city’s lockdown restrictions are loosened, according to a person with knowledge of the matter.

Germany’s largest lender has also told its investment bankers in the U.S. that it expects them to resume working from office no later than Labor Day, according to a memo seen by Reuters. The bank earlier said it was following a regional approach to the pandemic and return to the office issues, reflecting the different situations in individual countries.

SWITZERLAND

Credit Suisse

Credit Suisse in July 2020 launched a global program evaluating various work-from-home options, which are expected to shape its post-pandemic working models. It has been monitoring and adapting work arrangements since launching work-from-home globally in March 2020, taking into account local guidelines.

UBS

UBS Chairman Axel Weber in May said flexibility would remain part of work arrangements at Switzerland’s biggest bank going forward, where roles allow. Return to office plans vary from region to region, in accordance with local government guidelines.

CANADA

Royal Bank of Canada, the country’s largest lender, is exploring a flexible and hybrid work arrangement to bring its employees back to the office, Chief Executive Officer David McKay said.

Source: Company statements, memo, sources (Reporting by Noor Zainab Hussain and Niket Nishant in Bengaluru, Iain Withers and Lawrence White in London, Tom Sims in Frankfurt and Oliver Hirt in Zurich, and Matt Scuffham and Elizabeth Dilts Marshall in New York; Editing by Anil D’Silva and Ramakrishnan M.)



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BofA debuts cryptocurrencies research team led by Alkesh Shah, BFSI News, ET BFSI

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Bank of America Corp. created a new team dedicated to researching cryptocurrencies, marking Wall Street’s latest push to capitalize on investors’ frenzy for digital assets.

Alkesh Shah will lead the effort, which will also cover technologies tied to digital currencies, and report to Michael Maras, who leads fixed-income, currencies and commodities research globally, according to an internal memo seen by Bloomberg. A spokeswoman for the firm confirmed the contents of the memo, declining to comment further.

“Cryptocurrencies and digital assets constitute one of the fastest growing emerging technology ecosystems,” Candace Browning, head of global research for Bank of America, said in the memo. “We are uniquely positioned to provide thought leadership due to our strong industry research analysis, market-leading global payments platform and our blockchain expertise.”

Banks have been increasingly looking to expand into the wild world of cryptocurrencies, with many pushing to offer wealth-management products or custody services for the asset class. Some banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., have begun offering crypto-futures trading.

Shah joined Bank of America in 2013 after stints at Morgan Stanley and Lehman Brothers Holdings Inc. and previously led Bank of America’s global technology specialist team. Mamta Jain and Andrew Moss will also join the lender’s research arm as part of the changes and continue to report to Shah, Browning said in the memo.



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US IPO market a danger zone for Chinese firms after Beijing crackdown, BFSI News, ET BFSI

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HONG KONG/NEW YORK: China’s stepped-up scrutiny of overseas listings by its companies and a clampdown on ride-hailing giant Didi Global Inc soon after its debut in New York have darkened the outlook for listings in the United States, bankers and investors said.

On Tuesday Beijing said it would strengthen supervision of all Chinese firms listed offshore and tighten rules for cross-border data flows, a sweeping regulatory shift that is also set to weigh on the long-term valuations of the IPO-bound companies, they said.

Bankers and investors expect the pace of activity to slow in the near-term as investors grapple with Beijing’s decision to tighten supervision of firms listed offshore, coming just days after regulators stunned investors by launching a cybersecurity investigation into Didi.

“It suffices to say those Chinese companies already planning to list in the US will have to pause, or even abandon the plans altogether, in the face of mounting uncertainties and confusions,” said Fred Hu, chairman of Primavera Capital Group.

“The US market is off limits, at least for now,” said Hu, whose private equity firm’s portfolio include a number of tech companies that have gone public overseas. “…The stakes are extraordinarily high, for both the tech companies and for China as a country.”

US capital markets have been a lucrative source of funding for Chinese firms in the past decade, especially for technology companies looking to benchmark their valuations against listed peers there and tap an abundant liquidity pool.

A record $12.5 billion has been raised so far in 2021 in 34 offerings from listings of Chinese firms in the US, Refinitiv data shows, well up from the $1.9 billion worth of new listings in 14 deals in the year-ago period.

Analysts say China’s moves to look more closely at firms venturing overseas add a new layer of uncertainty for firms already struggling to navigate escalating tensions between Beijing and Washington over a broad range of issues.

“The message is that for a successful overseas listing, Chinese regulators must be involved, as well as international cooperation with overseas regulatory bodies,” said Louis Lau, California-based Brandes Investment Partners’ director of investments.

“Overseas-listed Chinese companies may have had the mistaken impression that it can ignore Chinese regulators just because they are not listed in China,” Lau, whose company holds Chinese stocks, told Reuters.

The broader regulatory clampdown and Didi’s listing dustup drove the S&P/BNY Mellon China Select ADR Index, which tracks the American depositary receipts of major US-listed Chinese companies, down 3.4% on Tuesday.

‘CLEAR SIGNAL’ Catching many investors, and Didi, off-guard, the Cyberspace Administration of China (CAC) on Sunday ordered the ride-hailing firm to remove its apps from app stores in China for illegally collecting users’ personal data, less than a week after it made its debut on the New York Stock Exchange following its $4.4 billion initial public offering.

It was the largest Chinese IPO in the US since e-commerce giant Alibaba Group raised $25 billion in 2014.

For investors, the euphoria was shortlived, with Didi’s shares diving nearly a third since its debut on June 30. The stock fell for third consecutive session on Wednesday, ending down 4.6%.

The CAC also announced probes into Kanzhun Ltd’s online recruiting app Zhipin and truck hailing company Full Truck Alliance.

“It’s a clear signal that the Chinese government is not particularly happy that these firms continue to decide to raise capital in the west,” said Jordan Schneider, a technology analyst at research firm Rhodium Group.

The measures come as the US securities regulator in March began rolling out new regulations that could see Chinese companies delisted if they do not comply with US auditing rules.

BOOST FOR HONG KONG

While the latest crackdown has dimmed the outlook for large Chinese IPOs in New York, not all companies are rushing to pull their ongoing offerings just yet.

LinkDoc Technology Ltd, which is described as a Chinese medical data solutions provider, is currently raising up to $211 million in a US IPO and is due to price its shares after the US market closes Thursday.

There has been no change to that time table yet, according to two sources with direct knowledge.

LinkDoc did not immediately respond to a request for comment.

Wall Street banks, which have benefited from Chinese firms’ rush to list in New York in recent years, are also expected to take a hit on their fee income in the near-term, according to bankers.

Investment banking fees from Chinese offerings were worth $485.8 million so far in 2021, Refinitiv data shows. Goldman Sachs, Morgan Stanley and JPMorgan are at the top of the league table for deal volume, according to the data.

Goldman Sachs and JPMorgan declined to comment, while Morgan Stanley did not respond.

Some bankers said the latest regulatory clampdown will further boost Hong Kong’s allure as a fundraising venue for Chinese companies looking to avoid the new restrictions for listing in the United States.

Underscoring that optimism, shares in Hong Kong Exchanges and Clearing Ltd (HKEX) rose as much as 6.2% on Wednesday, and was the second most actively traded stock by turnover.

“Buying is fueled by an expectation that HKEX may become the only IPO center for Chinese firms seeking listing and the main center for raising foreign capital,” said Steven Leung, sales director at brokerage UOB Kay Hian in Hong Kong.



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BofA debuts cryptocurrencies research team led by Alkesh Shah, BFSI News, ET BFSI

Personal Finance

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Bank of America Corp. created a new team dedicated to researching cryptocurrencies, marking Wall Street’s latest push to capitalize on investors’ frenzy for digital assets.

Alkesh Shah will lead the effort, which will also cover technologies tied to digital currencies, and report to Michael Maras, who leads fixed-income, currencies and commodities research globally, according to an internal memo seen by Bloomberg. A spokeswoman for the firm confirmed the contents of the memo, declining to comment further.

“Cryptocurrencies and digital assets constitute one of the fastest growing emerging technology ecosystems,” Candace Browning, head of global research for Bank of America, said in the memo. “We are uniquely positioned to provide thought leadership due to our strong industry research analysis, market-leading global payments platform and our blockchain expertise.”

Banks have been increasingly looking to expand into the wild world of cryptocurrencies, with many pushing to offer wealth-management products or custody services for the asset class. Some banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., have begun offering crypto-futures trading.

Shah joined Bank of America in 2013 after stints at Morgan Stanley and Lehman Brothers Holdings Inc. and previously led Bank of America’s global technology specialist team. Mamta Jain and Andrew Moss will also join the lender’s research arm as part of the changes and continue to report to Shah, Browning said in the memo.



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AU Small Finance Bank surges 9% after Q1 update, BFSI News, ET BFSI

Banking & Finance

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New Delhi: Shares of AU Small Finance Bank soared 9 per cent in early trade on Tuesday following the June 2021 quarter update by the lender.

The numbers gave a relief to the investors who were expecting a worse impact of the Second Covid Wave on the small finance lenders. The restrictions on mobility and business during the second wave were less stringent than those during the nationwide lockdown.

The gross advances showed a growth of 31 per cent on year-on-year basis (YoY) to Rs 34,688 crore in the quarter ended on June 30, 2021 from Rs 26,534 crore in the June 2020 quarter. The loans in the March 2021 quarter were Rs 35,356 crore.

Shares of AU Small Finance Bank soared 9 per cent to Rs 1,126 on Tuesday at the time of writing this report. BSE Sensex was trading at 52,960.83, up by 83.83 points or 0.15 per cent higher at the same time.

Disbursements in Q1FY22 were at Rs1,896 crore (including Rs 302 crore of ECLGS disbursements) compared to disbursement of Rs 1,181 crore (including Rs 23 crore of ECLGS disbursements) in Q1FY21.

Total Deposits in the bank were Rs 37,014 crore, as of June 30, 2021, 38 per cent higher than the deposits at Rs 26,734 crore on June 30, previous year. The deposits inched up 3 per cent on quarter-on-quarter basis (QoQ).

The small finance bank has delivered over 32 per cent in the year 2021 so far. The counter has soared over 90 per cent in the last one year.

The CASA Ratio stood at 26 per cent in the June 2021 quarter, compared to Rs 14 per cent in the quarter a year ago. Average cost of funds decreased to 6.3 per cent to 7.2 per cent during the period under review.

The global brokerage firm Morgan Stanley is bullish on AU Small Finance Bank. It has maintained an ‘overweight’ stance on the lender with a target price of Rs 1,150. “The AUM growth for the lender is stable on a YoY basis and down 3 per cent QoQ.” it added.



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Global banks in Hong Kong push to get staff back to office, BFSI News, ET BFSI

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By Kane Wu and Scott Murdoch

HONG KONG – Global banks are moving faster in Hong Kong to get staff back to office versus in other major centres, given fewer daily COVID-19 cases in the Asian city, and are offering incentives such as onsite vaccinations and days off to encourage inoculation.

Morgan Stanley has more than 70% of its staff back at their desks in the Asian financial hub, while 60%-70% of Credit Suisse employees are in their office，said people who work there. A Citigroup spokesman said 75% of the bank’s staff were in the workplace in Hong Kong.

JPMorgan plans to reach 75% office occupancy in the coming weeks and Bank of America, which until recently had most of its staff working from home, aims to reach full capacity by end-June, their bankers said.

Morgan Stanley, Credit Suisse, JPMorgan and Bank of America declined to comment.

At UBS, up to 60% of its Hong Kong workforce were back in the office, a spokesman told Reuters.

At these levels, occupancy at the Hong Kong offices of many of these banks will be ahead of the rates in New York and London where daily virus cases are still in the hundreds.

Hong Kong has recorded only one daily case on an average in the past week, while 28.5% of its population has received at least one vaccine shot, government data showed.

The banks’ return-to-office push in Hong Kong comes amid the city’s dealmaking boom and hiring frenzy as the Chinese economy recovers from the pandemic.

Returning to the workplace will allow bankers to attend in-person meetings and help secure more deals in a market where mergers and underwriting deals are set to pick up pace.

Most banks are offering two days off for employees who get vaccinated, in line with a government policy, to encourage staff to get inoculated and hasten their return to office.

Some are pushing harder.

Morgan Stanley set up an on-site vaccination operation on June 16 for staff who had not received any shot, according to people who work there. The bank will do it again in three weeks so people can get their second shot, one of the employees said.

Morgan Stanley declined to comment.

Citi will host its first onsite vaccine clinic for local staff on June 22, the spokesman said.

FLEXIBLE POLICY

While banks are looking to bring workers back to office, some are retaining a flexible approach.

An HSBC spokeswoman said the bank’s Hong Kong headquarters was now open for all staff to return but that people could choose between working from office and home.

“I hated working from home,” said a sales banker at HSBC. “I missed being able to chat with my colleagues all the time for leads and gossips. It was not fun at all at home.”

Standard Chartered said two-thirds of its bankers were back in office but that it too remains flexible. Hong Kong is its single largest market.

The bankers Reuters spoke to declined to be named as they were not authorised to speak to the media.

Goldman Sachs is also encouraging all staff members to get vaccinated in the Hong Kong office, a spokesman said.

“Since we reopened the office to all staff on June 7, the number of employees coming to the office every day is at pre-COVID levels, or higher if you consider that travel is way down,” he said.



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More US finance giants tiptoe into crypto assets, BFSI News, ET BFSI

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NEW YORK: Investing in bitcoin and other digital currencies remains a risky game where the rules could change significantly, but the payoff could be big.

In response to this dilemma, several leading US financial heavyweights are staying on the sidelines, while an increasing number are proceeding cautiously into the growing world of crypto assets.

“My own personal advice to people: Stay away from it,” JPMorgan Chase Chief Executive Jamie Dimon said recently, before adding, “That does not mean the clients don’t want it.”

JPMorgan, the biggest US bank by assets, is currently assessing how it can help clients transact in cryptocurrency, Dimon said last month at the bank’s annual meeting.

Formerly something of an investment sideshow dominated by computer geeks, cryptocurrencies are sparking greater interest among mainstream investors after a big jump in bitcoin prices in 2020 and early 2021.

On Thursday, the venerable giant State Street announced the creation of a new digital finance division.

On Wednesday, the head of online trading firm Interactive Brokers vowed to establish online trading of cryptocurrencies on the platform by the end of the summer.

Like its rivals Charles Schwab and Fidelity, Interactive Brokers does not now offer bitcoin trading on its platform, although it does give clients the option to invest in some assets that include cryptocurrencies or bitcoin futures.

Investors who want to trade bitcoin can currently turn to Robinhood or the cryptocurrency specialist Coinbase.

ForUsAll, a platform that manages retirement accounts for small businesses, on Monday announced an agreement with Coinbase that allows clients to invest up to five percent of their balances in cryptocurrencies.

Investment bank Morgan Stanley in March said it would allow wealthier clients to invest in bitcoin funds, while Goldman Sachs recently established a team dedicated to trading cryptocurrencies.

The chief executives of Wells Fargo, Citigroup and Bank of America said at a congressional hearing in late May that they are approaching the cryptocurrency landscape with caution.

Fidelity Investments, which established a digital assets division in 2018 to execute cryptocurrency trades for hedge funds and other institutional investors, filed papers with US securities regulators for a bitcoin exchange traded fund (ETF).

The move could potentially expand cryptocurrency investments to a broader range of individual investors.

Tougher rules ahead?
Still, many financial players are reluctant to dive into an investment realm associated with black markets that has sparked interest from US and global regulators.

There is also remarkable volatility, with bitcoin beginning 2021 at around $30,000 and hitting $63,000 in April before falling back to $34,000 in June.

“Speculators and those suffering from FOMO (the ‘fear of missing out’) will surely continue to flock to cryptos in the hopes of achieving huge returns,” said Ian Gendler of research firm Value Line.

But Gendler urges clients to avoid cryptocurrency investments, citing the elevated risk and the lack of a tangible asset compared with putting money into commodities or a company. Bitcoin and other digital money is also not backed by governments, he noted.

“Cryptocurrencies are only worth what the next investor is willing to pay,” he said.

Still, many in finance do not see cryptocurrency as a transient phenomenon.

“We do believe bitcoin, and more broadly crypto assets, are a new and emerging asset class that will likely be here to stay,” said Chris Kuiper, vice president at CFRA Research.

CFRA expects “the large banks as well as smaller financial institutions to continue to adopt them, particularly as the infrastructure and legal/regulatory framework continues to be built out,” Kuiper added.

The Basel Committee, which coordinates regulation among central banks, this week proposed new rules that would require banks to set aside capital for cryptocurrency investments.

Gary Gensler, the new head of the Securities and Exchange Commission, has also said he wants to bolster protections for cryptocurrency investors, telling CNBC that such investors “don’t have full protections that they have in the equity markets or in the commodity futures market.”



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