BNY Mellon’s Asset Management Unit ‘Skeptical’ About Bitcoin’s Ability as a Means of Payment
Insight Investment, which manages about $1 trillion in assets, says the cryptocurrency may not be suitable for most institutional investors due to several issues.
Banking giant BNY Mellon is one of the few banks that allows its clients to hold, transfer, and issue crypto assets, but one of its own asset management units is not really interested.
According to Insight Investment, which manages about $1 trillion in assets, Bitcoin may not be suitable for most institutional investors because of its high volatility and low liquidity besides the governance challenges and ESG risks.
Slow and expensive transactions are other factors that may hinder the leading cryptocurrency’s adoption, said Francesca Fornasari, head of currency solutions at Insight.
“We’re skeptical in terms of the ability of Bitcoin to take over as a means of payment,” said London-based Fornasari.
Back in February, meanwhile, BNY Mellon said it would hold, transfer, and issue digital currencies in response to a surge in client interest. According to Fornasari, providing custodial services for digital assets makes sense because they’re going to be increasingly important in the investment space.
A unit of BNY Mellon, the asset manager, meanwhile expects to see a rise of cryptocurrencies to challenge Bitcoin, especially those that solve the speed, cost, energy usage, and volatility issues, she wrote in a recent report.
According to Fornasari, Bitcoin is also harder to evaluate than gold because of its drastic price swings, which makes it difficult to know with certainty how it reacts in an inflationary environment.
“There’s a whole number of different factors and considerations that are going to affect the value of your investment (in Bitcoin), that have nothing to do with inflation or inflation hedges.”
Not just Insight but others like Qatar Investment Authority, one of the world’s largest sovereign wealth funds, are also wary of Bitcoin’s volatility which, unlike the traditional finance, the crypto market is seen as a feature and not a bug.