Investment Advisors Need to Get Savvy on Crypto and Blockchain Says Fintech Strategist
Global Director of fintech strategy at Autonomous Research Lex Sokolin said that investment advisors need to familiarize themselves with crypto and its underlying technology, however sceptical they may be, in an interview with CNBC May 16. Sokolin argued that investors will buy Bitcoin (BTC) whether advisors “like it or not,” so both individuals and financial advisors need to adapt to the phenomenon:
"Cryptocurrency is very controversial, but it's really here to stay, and the underlying [blockchain] technology is really fundamental to the types of companies that people are building right now."
Sokolin stressed that given the wild volatility of crypto markets, it wouldn’t be prudent to “go and fill your entire portfolio with cryptocurrencies.” However, he suggested that investing in crypto “is a good way to add alternatives to your general allocation, something like 3 [percent] to 5 percent of your portfolio."
The traditional financial sector has historically been distrustful of the emerging crypto industry, with major Wall Street banks such as Merrill Lynch banning their financial advisors from buying Bitcoin-related investments for their clients. They went so far as to ban clients’ access to the Bitcoin futures contracts offered on CME and CBOE.
Wall Street’s skeptical approach to crypto was exemplified by JP Morgan CEO Jamie Dimon’s outspoken dismissal of Bitcoin as “a fraud” last year, a statement he soon claimed to regret, softening his stance to one of avowed indifference. Dimon said he was, “not interested that much in the subject at all.”
Over the course of the spring, Wall Street has begun softening its stance on crypto. Investment banking giant Goldman Sachs announced it would offer certain contracts with Bitcoin exposure, before rumoredly offering crypto trading.
Recent news that the New York Stock Exchange’s owner may soon offer swap contracts in BTC, suggests that the major custody and security obstacles to mainstream institutional investment in the crypto space are being overcome. Beyond the US, Japan-based global investment bank Nomura revealed a digital asset custody solution for institutional clients yesterday.
Blockchain has made similar headlines this week, with Amazon Web Services, the tech giant’s cloud computing arm, launching a partnership with a ConsenSys’ blockchain startup to offer simplified blockchain cloud platforms to its clients.