Amid the popularity of digital coins among banks like Citigroup, Morgan Stanley, and Goldman Sachs, HSBC has confirmed its position on cryptocurrency investments.
Talking to Reuters, HSBC CEO Noel Quinn said that the bank does not plan on launching a cryptocurrency trading desk or offer digital coins. According to Quinn, the current volatile nature of Bitcoin means that it’s not useful for them as an asset:
“Given the volatility, we are not into bitcoin as an asset class, if our clients want to be there then of course they are, but we are not promoting it as an asset class within our wealth management business.”
HSBC is also not interested in stable coins because they are also too volatile: “For similar reasons, we’re not rushing into stablecoins,” Quinn added.
Bitcoin’s Recent Volatility
The volatility of Bitcoin has been in full view in the past few months. In February, Bitcoin broke the $50K barrier for the first time, and in April the cryptocurrency reached its highest value to date of almost $64.9K.
But, Bitcoin couldn’t maintain its value after a series of negative news related to it became public. We heard about fossil fuel-based Bitcoin mining in China, Tesla discontinuing Bitcoin payments because of environmental concerns, and the Chinese government cracking down on cryptocurrency miners. BTC is currently trading at around $37.8K, a over 40% drop from its mid-April high.
One of the contributing factors to Quinn’s skepticism of cryptocurrencies is ambiguity about ownership of the currency. Quinn is also clear that Bitcoin is more of an asset than a method of payment:
“I view Bitcoin as more of an asset class than a payments vehicle, with very difficult questions about how to value it on the balance sheet of clients because it is so volatile.”
Central Bank Digital Currencies (CBDCs)
One type of currency Quinn supports is a central bank digital currency CBDC. “CBDCs can facilitate international transactions in e-wallets more simply, they take out friction costs and they are likely to operate in a transparent manner and have strong attributes of stored value.”
According to economist James Pomeroy, HSBC, The Bank for International Settlements estimates 10% of central banks claim they may issue a CBDC within three years and 20% within six years.
“There are pilots in Ukraine, South Korea, Iceland, and Thailand, while Canada, Brazil, and Cambodia are working on ideas. The Bahamas’ card-based ‘Sand Dollar’ has already been tested on two islands,” Pomeroy added.
Among the big economic players, the Riksbank of Sweden and People’s Bank of China are “fast ahead in developing CBDCs,” mentions Pomeroy.
The HSBC is involved with China's CBDC project. Specifically, the bank is helping the country test the currencies for cross-border payments.
China announced a crackdown on crypto mining on Friday. Bitcoin's price took a major hit as a result. Talking to CNBC about the crackdown, FX research head at HSBC Paul Mackel said that this is not something novel as China has been “more cautious” on cryptocurrencies. He also said that the move does not conflict with the countries plan to launch its CBDC digital yuan.