The ongoing acquisition of Bitcoin by MicroStrategy has sparked the ire of investment banking giant HSBC. Despite being one of the largest business intelligence companies in the world, HSBC has stated that MicroStrategy is now a “ virtual currency product, ” a designation similar to the status of the pseudo-Bitcoin exchange-traded fund associated with the company because of the bulky Bitcoin. (BTC) balance.
Since August 2020, MicroStrategy has embarked on a Bitcoin acquisition and now owns more than $ 5 billion in BTC. Michael Saylor, the company’s CEO, has also become an outspoken Bitcoin advocate. Saylor’s Bitcoin evangelism included attempts to encourage other listed companies to add BTC to their balance sheets. Indeed, some other companies in the United States have been mimicking Saylor’s acceptance by Bitcoin.
With Bitcoin adoption by businesses becoming commonplace, the talk seems to be shifting to life and annuities and sovereign wealth funds to see where the next wave of institutional BTC investment will emerge. However, for legacy players such as HSBC, Bitcoin and cryptocurrencies in general remains anathema, even if the actions taken so far seem arguably random.
HSBC blacklisted MicroStrategy stock
HSBC blacklisted MicroStrategy’s stock, preventing customers of the bank’s online trading platform in Canada from acquiring the company’s stock. While HSBC did not respond to Cointelegraph’s request for confirmation of the report, the bank publicly verified the news using similar statements in the original message shared by customers on Twitter.
In its message to HSBC InvestDirect clients who already hold MicroStrategy (MSTR) shares, the bank disclosed that additional MSTR purchases will no longer be possible on the platform. The release stated that such clients could hold their current MicroStrategy stock balances or sell their shares.
According to HSBC, the blacklist was in line with the bank’s crypto restrictions in effect in 2018. An excerpt from the bank’s policy as included in the notice to HSBC InvestDirect, or HIDC, reads: “HIDC will not participate in the facilitation (purchase and / or exchange) product related to virtual currencies, or products related to or refer to the performance of virtual currencies. “
Commenting on the news, Stuart Hoegner, general counsel at crypto exchange platform Bitfinex, told Cointelegraph that the decision was a “regressive step” in the context of the growing pull of cryptocurrencies in the mainstream arena, adding:
“Rather than refusing to participate in products related to virtual currencies, HSBC should instead focus on providing optimal services to its customers, many of whom pay high fees and interest rates for its loans and credit card products. the couch. In fact, it is the capacity of blockchain technology – by removing intermediaries – that can improve the degree of inclusion, accessibility and transparency of financial products. “
In choosing MicroStrategy, HSBC referred to the company as a “virtual currency product,” hence the decision to prevent customers from purchasing MSTR. However, HDIC lists shares of several companies with significant cryptocurrency involvement, including Tesla, Square, and Hut 8 Mining, to name a few.
Tesla, the giant of Elon Musk’s electric car industry, acquired approximately $ 1.5 billion worth of Bitcoin in February. Hut 8 is a Bitcoin mining company, while Square operates the Cash app, a way of buying BTC that is also a major contributor to Square’s earnings.
Unlike MicroStrategy, which only holds Bitcoin on its balance sheet while still performing its function as a business intelligence company, some of the tradable stocks on the HDIC platform are owned by companies, such as Hut 8, which derive value directly from cryptocurrencies .
Commenting on the lack of clarity in HSBC’s decision, Jeffrey Wang, America’s chief at crypto finance firm Amber Group, told Cointelegraph, “It’s a very slippery slope for HSBC. Will they publish a clear set of defined rules for what they consider to be businesses deriving value from virtual currencies? ”
He went on to wonder, “Why didn’t they also impose this trade restriction on other companies that have disclosed their holdings of Bitcoin such as Tesla? Will they block trading in Coinbase? As an HDIC customer, Wang also expressed dissatisfaction with the uneven application of HSBC’s anti-crypto policies, adding:
“I think this will push HSBC beyond its retail brokerage reach. If a company is lawfully listed on the Nasdaq and meets all legal requirements, the decision to purchase these stock should be left to the end user and not the brokerage. “
HSBC’s ban on MicroStrategy stock trading gets even more bizarre as clients can still purchase exchange-traded funds containing MSTR on the platform. Indeed. According to ETF.com, 88 ETFs own MicroStrategy shares.
The MSTR blacklisting is by no means the first negative consequence of MicroStrategy’s Bitcoin investment boost. In December 2020, Citibank cut the company’s stock, citing MicroStrategy’s “disproportionate” focus on BTC.
New layers of legitimacy
HSBC’s move firmly places the bank in the corner of old financial institutions that are still averse to Bitcoin and cryptocurrency innovation. The move provides the latest indication of the bank’s rejection of digital currencies following attempts to prevent clients from repatriating crypto trading profits from exchanges to their bank accounts earlier this year.
Meanwhile, several major players in the traditional financial arena are increasingly exposed to Bitcoin and cryptocurrencies as the new technology takes on new layers of legitimacy. From offering digital currency custody services to establishing platforms for exchanging digital assets, banks in the United States, Europe and Asia are showing a greater appetite for digital currencies.
For Amber Group’s Wang, HSBC is holding on to a shrinking position as a banking institution that remains averse to cryptocurrencies, Cointelegraph says:
“I think HSBC will be in the small minority – if not the only brokerage – that will dissuade its retail investors from buying shares in listed and regulated companies because of their exposure to virtual currencies.”
Recently, European investment banking giant Société Générale issued a tokenized security representing one of its structural products – investment packages linked to assets and derivatives – on the Tezos blockchain. The news marked the third consecutive year that a blockchain-related financial product has been released.
In a message to Cointelegraph, Jean-Marc Stenger, managing director of digital capital markets at Société Générale and head of fintech startup subsidiary SG Forge, noted that crypto companies will challenge longtime financial players who are slow to adapt to the emerging digital financial world. landscape. Rather than advocating shunning digital assets, Stenger identified the benefits of traditional finance in real-world asset-based tokenization, adding:
“Traditional financial institutions know how to structure regulated digital assets and how to deal with related requirements (investor protection, market integrity rules, compliance, KYC, business continuity plans). But more importantly, they have capabilities for origination and distribution and day-to-day business relationships with their customers. “
While Société Générale’s digital asset offering is not tied to cryptocurrencies, major US investment banks such as Goldman Sachs and Morgan Stanley want to offer their clients exposure to Bitcoin funds.
Amid the ongoing influx of institutional actors into the Bitcoin space, the question of whether governments will invest in BTC likely becomes a matter of ‘when’ and not ‘if’. With insurance companies and pension funds dipping their toes into the Bitcoin pool, sovereign wealth funds don’t seem far behind.