While crypto optimism is on the rise amongst asset managers as of late, banks remain mixed about the digital asset class with some accelerating adoption while others are still on the sidelines. finews.asia reviews the two industries' different crypto paths.
Recently, optimism in the crypto market has been on the rise amongst asset managers with various industry giants making moves to launch new offerings and acquire rising players.
Blackrock introduced bitcoin private trusts shortly after announcing a partnership with Coinbase to offer crypto access to institutional investors. Last month, Schroders took a minority stake in Zug-based digital asset manager Forteus while Charles Schwab launched its first crypto-related ETF that allows investors to gain exposure without buying the currencies. And just this week, abrdn bought a stake to become the largest external shareholder of London-based digital asset exchange Archax.
Recovering Fund Flows
There are signs in the market that the recently accelerated positioning by asset managers is warranted. According to data from crypto asset manager CoinShares, digital asset investment products registered their sixth consecutive week of positive flows, as of August 8, reversing the year-to-date outflow to a $490 million net inflow.
«Blockchain technologies are inevitably going to form a big part of the future of financial markets,» abrdn chief executive Stephen Bird said in a statement accompanying the crypto stake purchase.
Divided Banks
In contrast, banks have expressed varying levels of interest in adding crypto products and services to their client offerings.
Julius Baer is one of the most visibly bullish lenders in the space with research coverage, the launch of a crypto offering in May and a stake in Swiss crypto bank SEBA, which inked a partnership with rival wealth manager LGT and is seeking to nearly triple its headcount in Asia.
Amongst universal banking giants, Goldman Sachs and Morgan Stanley rolled out crypto offerings for wealth management clients last year while Nomura launched a subsidiary in May dedicated to digital assets across cryptocurrencies, stablecoins and non-fungible tokens.
Caution Applied
Elsewhere, more caution is being applied amongst banks with volatility underlined as the key argument for not including the nascent asset class on product shelves.
Pictet’s Asia wealth chief Tee Fong Seng was notably vocal in a recent Bloomberg summit, saying that while crypto should not be ignored, it currently has no place in private banking.
Even DBS, which has been a relatively early crypto optimist with the launch of its own digital exchange in December 2020, has slowed down expansion. After maintaining that a crypto offering would be made available to retail clients by end-2022, the bank reversed plans in April over regulatory concerns with CEO Piyush Gupta saying that the current environment may not allow mass access «anytime in the immediate future».
Investor Versus Banker
In the near term, banks are likely to remain more cautious about crypto due not only to the constraints of regulations but considerations for other parts of their business, most notably investment banking where traditional stocks and bonds are still dominated by securities denominated in fiat currencies. Cryptocurrencies are also unlikely to find their way into balance sheets in a big way soon due to high volatility.
In contrast, the primary focus for asset managers is to generate returns as an investor and while it is unnecessary to have exposure to any and every asset, optionality is never a disadvantage.
«As is the case for many European banks, we don’t offer investments in cryptocurrencies,» said Lombard Odier's North Asia head of private clients David Loo in a recent conversation with finews.asia. «However, we believe the more asset classes made available in a portfolio, the closer it will be to an efficient frontier from an investor’s perspective.»
