Insight Investment, the asset management unit of BNY Mellon, remains skeptical of bitcoin, even as the investment bank now provides crypto services.
Since February, New York-based investment bank BNY Mellon has allowed clients to hold, transfer and issue digital currencies. BNY Mellon believes it is the first global bank to do this. However, despite the investment bank’s appraisal, one of its own asset management units is a bit more skeptical.
Insight Investment, which manages about $1 trillion in assets, thinks bitcoin is not suitable for most institutional investors. This is because of its high volatility, low liquidity, governance challenges, and ESG risks. Francesca Fornasari, head of currency solutions, also said that slow and expensive transactions may also hinder widespread adoption. “We’re skeptical in terms of the ability of bitcoin to take over as means of payment,” Fornasari said.
Fornasari’s team provides a variety of currency solutions, which can range from hedging to absolute returns. She highlighted specialist funds that understand blockchain technology for investors seeking to gain exposure to crypto-assets. Insight expects rival cryptocurrencies to rise and challenge bitcoin, especially those which solve some of its most persistent issues. These include the speed and cost of transactions, as well as energy usage and volatility.
Institutional crypto interest
Meanwhile, Insight is just an asset management unit of BNY Mellon. The investment bank adopted its new digital currency policy in February. Chief Executive Officer Todd Gibbons said this was the natural reaction to a surge in client interest. Fornasari said that providing custodial services for digital assets just makes sense. She says they’re going to become an increasingly important part of the investment landscape.
However, other large financial institutions remain skeptical. For instance, the extreme volatility makes cryptocurrencies unappealing for the Qatar Investment Authority. JPMorgan’s chair of global research also cited it as “prohibitive for a lot of corporate treasurers and institutional investors.”
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