BNY Mellon says it’s the first global bank to allow clients to hold, transfer and issue digital currencies. But one of its own asset management units isn’t so sure about Bitcoin.
Bitcoin, the largest cryptocurrency, may not be suitable for most institutional investors because of high volatility, low liquidity, governance challenges and ESG risks, according to Insight Investment, which manages about $1 trillion. Slow and expensive transactions may also hinder widespread adoption, according to Francesca Fornasari, head of currency solutions.
Extreme swings in Bitcoin, which has lost around 46% from its mid-April record of almost $65,000, are hampering its appeal for institutional investors. The cryptocurrency clampdown in China, tightening regulatory scrutiny elsewhere and concerns that the servers underpinning the virtual coin consume too much energy have been powerful headwinds for the digital asset in recent weeks. Bitcoin was at about $34,887 on Wednesday, heading for the worst quarter since the last three months of 2018.
“We’re skeptical in terms of the ability of Bitcoin to take over as means of payment,” said London-based Fornasari, whose team provides currency solutions ranging from hedging to absolute returns.