Cryptocurrencies

Wealth managers are divided on cryptocurrencies – with some speeding ahead, while others avoid the hype.

Wealth managers and private banks have reacted to cryptocurrency mania in different ways, but there is consensus that blockchain technology, which drives cryptocurrencies could revolutionise the wealth management sector.

deVere Group, a global financial consultancy has launched a cryptocurrency app- called deVere Crypto- with the group’s CEO expecting demand for cryptocurrencies to “sky rocket” in the next 12 months. 

Five cryptocurrencies are available on the deVere Crypto App: Ripple, Dash, Bitcoin, Ethereum and Litecoin.

By market cap, Bitcoin is the world’s largest, followed by Ethereum (second) and Ripple (third). Litecoin is fifth and Dash is tenth.

deVere Group CEO Nigel Green said he expects the app to generate 50,000 downloads in 2018.

Another development in this space is Cryptos Fund, which passively tracks the CCI30 cryptocurrency index and paves the way for investors to diversify their cryptocurrency risk.

Cryptos Fund told Private Banker International it is registered as a corporation in the Cayman Islands and as a limited partnership, Cryptos Fund (US) in the USA.

Cryptos Fund claims to be the only “regulated fund offering a passive index tracking investment strategy on cryptocurrencies", free of performance fees

Meanwhile, Coutts Private Bank has ruled out involvement in cryptocurrencies with the private bank’s managing director, Mohammad Syed, saying:  “A cryptocurrency is not something we can stand behind or recommend.”

Syed made the comments at an investment outlook 2018 media briefing. Elaborating on Coutts rejection of cryptocurrencies, Syed said a cryptocurrency is a “faith-based investment”.

Lilian Chovin, an investment strategist at Coutts, recently said:  “In the struggle between believers and sceptics, we remain firmly on the side of the sceptics. Bitcoin’s value does not seem justified by its role as money, payment system or commodity and we struggle to assign a fair value to it. While some form of cryptocurrency might, in the future, co-exist with traditional currencies, it is our view that Bitcoin, in its current form is unlikely to be one of them.”

Another recent development has involved Finnish bitcoin broker Prasos generating €2.5m of equity financing, paving the way for the start-up to develop cryptocurrency based investment services for traditional investors.

The investment round attracted more than 1,000 investors both locally and internationally, and saw the Finnish fintech cede 15% of its equity.

In terms of those players in the fast lane, when it comes to cryptocurrencies, Swiss private bank Falcon stands out.

Earlier this year, Falcon Private Bank said new and existing private banking clients can place wealth originating from crypto assets and converted into a fiat currency. 

However, there are other views in the market regarding cryptocurrencies. For example, RBC Wealth Management says while they have had several of their advisory clients enquire about cryptocurrencies, they do not see themselves offering services anytime in the near future.

SAMT AG Asset and Wealth Management allows its clients the possibility to invest in Bitcoin futures in terms of both Chicago-based Cboe Futures Exchange and the Chicago Mercantile Exchange.

Bitcoin Futures began trading on the Cboe exchange on 10 December and on 18 December 2017 on the CME exchange.

While several advisory firms are getting interest in cryptocurrencies from clients, some firms say participation in cryptocurrency investments still remains relatively low.

Cryptomania is also posing dilemmas for financial regulators across the globe with each of them reacting differently.

For example, Ravi Menon, managing director of the Monetary Authority of Singapore, is reportedly against the creation of a digital currency.

Meanwhile, Sweden is reportedly considering the possibility of issuing a digital currency.

While many financial institutions serving HNWIs may be treading with caution when it comes to providing cryptocurrency-trading opportunities, they cannot ignore blockchain technology.

Many of them do indeed understand the widespread use of blockchain technology, with the partnership between Thailand’s Siam Commercial Bank and Japan’s SBI Remit being a good example of this.

Whether cryptocurrencies survive or not, even offering them in the short-term will require an understanding and implementation of blockchain technology, which can still be used to optimise firms’ data and operational processes.