Alex Weber, chairman of UBS Group AG, said the bank will not trade bitcoin or offer it to clients due to an expected massive drop in value caused by regulation.
In an interview at the World Economic Forum in Davos, Switzerland, Weber said bitcoin’s future will be undermined by market corrections.
Weber said South Korea is considering banning bitcoin exchanges on account of money laundering and tax evasion. China is also trying to control cryptocurrency, Weber reportedly said according to Bloomberg
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Banks Reluctant To Invest In Crypto
While banks are exploring blockchain technology, they are hesitant to invest clients’ funds in cryptocurrency because of regulatory concerns. This month, the European Commission announced it may increase its control over virtual currencies on account of an expected pricing bubble.
Tidjane Thiam, CEO of Credit Suisse Group AG, said bitcoin is in a bubble back in November. On Wednesday, he told listeners at Davos that he remains a blockchain fan and that digital currencies still have a future.
European banking executives have expressed doubts about cryptocurrency as an investment. Andrey Kostin, board chairman of Russia’s VTB Bank PJSC, said there is no big future for bitcoin while speaking at Davos. Nordea Bank AB in Sweden has banned its employees from trading bitcoin and other cryptocurrencies.
Bitcoin’s Elasticity Causes Price Gains
Every increase in bitcoin’s demand delivers a price increase since there is very little elasticity in bitcoin’s supply, Weber said. He called on regulators to “zoom in” on bitcoin, which traded at $11,076 on Wednesday, having fallen from $18,675 on Dec. 18.
Mark Haefele — chief investment officer of UBS — said in November that bitcoin’s ecosystem’s lack of government oversight presents investors with an “unquantifiable risk.”
Moreover, questioning that purchases of cryptocurrency should even be classified as investments, he stated that firms have no way to develop a clear exit strategy to secure profits.
Bitcoin Still Not Significant Enough
Even discounting those factors, Haefele said bitcoin does not even appear on UBS’s investment radar. Throwing shade on the significant growth experienced by the ecosystem this year, he stated that the approximately $230 billion cryptocurrency market cap was “not even the size of some of the smaller currencies” that UBS would include in its portfolio.
Former UBS banker Jan Brzezek, meanwhile, has launched a new cryptocurrency fund and is targeting $10 million by month’s end. The crypto fund is currently domiciled offshore and is passive in nature (though an active product is planned for the summer), tracking the performance of the maiden blue-chip index for cryptocurrencies, said Brzezek. He is seeking approval from Swiss regulators to broaden the reach of the fund to more clients.
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