Can Crypto Buttress the Asset Management Industry?
There are big opportunities for investment firms in digital currencies. But a lot hinges on market regulators.
Significant opportunities vs significant risks
Photographer: Mark Case/Getty Images
The outlook for the global asset management industry, plagued in recent years by unmerciful downward pressure on fees, is starting to look brighter. With memestocks, decentralized finance and non-fungible tokens capturing the headlines, money managers need to keep up with the zeitgeist. A new report suggests that the cryptocurrency markets offer a great opportunity for fund managers and wealth management firms to tap a new client base and seize a source of fresh revenue. Color me skeptical.
The Bank for International Settlements just put cryptoassets in the highest risk category, suggesting banks will need to hold a dollar in capital for each dollar’s worth of Bitcoin on their books. Risks abound, including regulatory uncertainty, crypto’s role in money laundering, the seeming vulnerability of wallets to getting stolen and backlash against the environmental costs of mining digital currencies. Not to mention the volatility that’s seen Bitcoin trade in a 130% range this year, leaving it currently about 40% off its April high.