In 18 months, investment firm Charles Schwab has 180’ed on the idea of offering cryptocurrency to its clients. Previously, the firm warned that cryptocurrencies were a purely speculative instrument. But now, based on client demand, it’s ready to make a move.
“If the company decides to participate in the crypto market we will be highly competitive, we will be disruptive, and we will be client oriented.”
There’s just one issue, the lack of regulatory clarity from the U.S. Securities and Exchange Commission (SEC). Aside from several high-profile lawsuits involving allegations of selling unregistered securities, there’s also the lack of a legal definition to contend with. With newly appointed Chair Gary Gensler at the helm, can we now expect the SEC to get its act together?
Financial Institutions Are Already Moving on Cryptocurrency
The past few months have seen a slew of big-name financial institutions greenlight cryptocurrency. BNY Mellon announced creating a new Digital Assets Unit dedicated to building the first multi-asset custody and admin platform for both traditional and digital assets.
The CEO of Asset Servicing and Head of Digital at BNY Mellon, Roman Regelman, said growing client demand was a factor in the decision. Unlike Schwab, BNY Mellon is confident to press ahead despite the ambiguous regulatory situation.
“Growing client demand for digital assets, maturity of advanced solutions, and improving regulatory clarity present a tremendous opportunity for us to extend our current service offerings to this emerging field. Pending further evaluations and approvals, we expect to begin offering these innovative and industry-shaping capabilities later this year.”
Goldman Sachs is also exploring the idea of offering its wealthy clients the “full-spectrum” of cryptocurrency investment opportunities. Mary Rich, the Global Head of Digital Assets, said this could include spot, derivatives, or via traditional investment vehicles.
However, it seems as though Schwab is waiting for more concrete substantiation from the SEC before making its move.
Schwab Needs Clarity
Schwab custodies $7.07 trillion, including $3.1 trillion on behalf of its network of Registered Investment Advisors (RIAs). Its latest report show revenues up 80% to $4.7 billion, based on last year’s Q1 of $2.6 billion.
Charles Schwab CEO Walter Bettinger told analysts that client excitement over cryptocurrency is high. But he said without regulatory clarity, the company’s approach is to watch and wait. Adding, if clarity comes, we should expect big moves from Schwab into cryptocurrency.
“We recognize well what’s going on. We would like to see more regulatory clarity, and if and when that comes, you should expect Schwab to be a player in that space in the same way it has been in other investment opportunities across the spectrum.”
The SEC has never given firm guidelines on how it determines which cryptocurrencies are securities and which are not. As much as the Howey test is touted as the standard, critics argue the test is broad and outdated.
With crypto-knowledgable Gary Gensler having been appointed as SEC Chair this month, the industry is looking to him for guidance.
But SEC Commissioner Hester Peirce said Gensler has a busy schedule dealing with non-crypto things. Although she added he is likely sympathetic to calls for regulatory clarity.
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