HSBC will not extend 'volatile' Bitcoin trading services to its wealthy clients, chief executive says

Europe's largest bank, however, supports central bank digital currencies, Noel Quinn says

FILE PHOTO: Representations of the virtual currency Bitcoin stand on a motherboard in this picture illustration taken May 20, 2021. REUTERS/Dado Ruvic/Illustration/File Photo
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HSBC has no plans to set up a cryptocurrency trading desk or offer the digital coins as an investment because they are too volatile and lack transparency, its chief executive Noel Quinn said.

Europe’s largest bank’s stance on cryptocurrencies comes as the world’s biggest and best-known digital currency, Bitcoin, lost about half its value since April 14 after China cracked down on mining the currency and prominent advocate Elon Musk tempered his support.

HSBC’s move marks it out against rivals such as Goldman Sachs, which has restarted its cryptocurrency trading desk, and UBS, which media reports said was exploring ways to offer the currencies as an investment product.

“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,” said Mr Quinn.

“For similar reasons, we are not rushing into stablecoins,” he said, referring to digital currencies such as Tether that seek to avoid the volatility typically associated with cryptocurrencies by pegging their value to assets such as the US dollar.

Bitcoin traded at $36,387 on Monday, down by about 50 per cent in 40 days from its year high of $64,895 on April 14. It rose more than 4 per cent on Tuesday to $37,903.

Pressure on the currency intensified after the billionaire Tesla chief executive and cryptocurrency backer Mr Musk reversed his stance on Tesla accepting Bitcoin as payment.

However, Mr Quinn said that he is a believer in central bank digital currencies that several countries, including the US and China, are working on.

“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,” he said.

HSBC is talking to several governments about their CBDC initiatives, including countries such as Britain, China, Canada and the UAE, he said.

China’s CBDC project is one of the most advanced among major global economies. City-wide trials involving state-owned banks began last year and there is also a pilot project for cross-border use under way in Hong Kong.

China is also involved in a separate project exploring CBDCs for cross-border payments, which HSBC has been involved in.

While Beijing presses ahead with central bank digital currencies, it has stepped up efforts to curb the use of cryptocurrencies.

China, which is central to HSBC’s growth strategy, said last week that it had banned financial institutions and payment companies from providing services related to cryptocurrency transactions.

Reuters reported in April that HSBC had banned customers in its online share trading platform from buying shares in Bitcoin-backed MicroStrategy, saying in a message to clients that it would not enable the purchase or exchange of products related to online currencies.

Mr Quinn said his scepticism of cryptocurrencies partly arose from the difficulty of assessing the transparency of who owns them, as well as problems with their ready convertibility into fiat money.

“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,” he said.

“Then you get to stablecoins, which do have some reserve backing behind them to address the stored value concerns, but it depends on who the sponsoring organisation is plus the structure and accessibility of the reserve.”

The growing popularity of cryptocurrencies has posed a problem for mainstream banks in recent years as they try to balance catering to clients’ interest with their own regulatory obligations to understand the source of their customers’ wealth.