Switzerland’s largest bank, UBS, has advised investors to “avoid cryptocurrencies and build their portfolio around less risky assets.” UBS analysts warned that regulators have shown that they can and will take action against the cryptocurrency sector.
UBS warning: cryptocurrencies are a speculative market
UBS’s global asset management team warned in a statement released last week that regulators around the world, particularly in the United States and the United Kingdom, would impose stricter regulations on cryptocurrencies. “China’s latest crackdown – against miners, banks, electronic payment networks and social media – has damaged cryptocurrency prices and operators,” UBS analysts wrote:
“Regulators have shown that they can and will take action against the cryptocurrency sector. We therefore propose to investors to avoid cryptocurrencies and build their portfolio around less risky assets.”
“We have long warned that a change in investor sentiment or regulatory measures could cause bloated cryptotars to collapse,” analysts added. “We think investors should avoid speculation on cryptocurrencies and consider returns and risk levels before buying alternative assets.”
The Bank pointed out that a number of regulators around the world have begun to tighten supervision of the crypt market. Recently, China has cracked down on BTC mining and payments. The Canadian Regulatory Authority has sent notices to crypto-exchanges to comply with regional securities legislation that requires registration. Regulators in Japan, the UK, the Cayman Islands and Thailand have focused on global crypto exchange Binance.
The United Kingdom has introduced strict registration requirements for crypto exchangess, which has led to 64 companies withdrawing their applications for registration. In South Korea, most small exchanges run the risk of having to close down due to strict regulatory and banking requirements.
UBS analysts added: “Cryptocurrency business practices, such as the use of 50-fold or 100-fold leverage, are fundamentally at odds with normal financial regulation.”
“While we cannot rule out future price gains in cryptocurrencies, we consider it a speculative market that poses significant risks for professional investors.”
However, the bank allegedly acknowledges that some clients want exposure to cryptocurrencies, especially BTC, and adds that it is considering offering crypto services to its wealthy clients. A growing number of investment banks are already doing this, including Goldman Sachs, Morgan Stanley, Citigroup, Standard Chartered and DBS.