Swiss multinational investment bank, UBS, has warned its clients that crypto assets are unsuitable for professional investors if regulatory pressure persists.
The Cautionary Notice
In a note delivered to clients last week, UBS’s global wealth management team noted that China’s new crackdown had harmed crypto prices and operators. They also warned that additional regulatory pushback throughout the world might intensify the downward pressure on digital asset prices:
“Regulators have demonstrated they can and will crackdown on crypto, so we suggest investors stay clear & build their portfolio around less risky assets. We’ve long warned that shifting investor sentiment or regulatory crackdowns could pop bubble-like crypto markets.”
Underlining Dangers
UBS agreed that additional increases in crypto might be possible. They also underlined the dangers that the speculative asset class could bring to investors:
“While we can’t rule out future price gains in cryptos, we see this as a speculative market that poses significant risks to professional investors.”
The Swiss bank also highlighted risks about leveraged trading, adding:
“Crypto trading practices, such as extending 50 X or 100 X leverage, appear fundamentally at odds with mainstream finance regulation.”
China’s Crack Down and Mixed Reactions
The recent Chinese crackdown on Bitcoin mining operations in early April witnessed a mixed reaction from the crypto community. Some argue that the migration of hash power from China offers the Bitcoin mining industry an opportunity to improve its ecological footprint. In addition to further decentralizing the network.
Bank’s Perspective
Banks have a different perspective, with UBS worrying that China’s moves would trigger a global financial regulatory response.
Recently, UK’s Financial Conduct Authority’s actions against Binance, the world’s largest digital asset exchange, on June 27, confirming UBS’ forecast. Since then, many prominent high street banks in the United Kingdom have blocked their clients’ access to crypto exchanges.
