UBS Group AG is in the early stages of planning to offer digital-currency investment services to wealthy clients – and the Swiss banking giant is trying to join other entering U.S. firms in seeking broader access to respond to customer demand.
The Swiss firm is exploring several options for offering the asset class, people familiar with the matter said. Either investment option represents a small portion of a client’s total wealth because of volatility, and options include investing through third-party investment vehicles, said one of the people familiar with the matter, but the person declined to give more details.
A growing number of global securities firms are offering cryptocurrency services. Goldman Sachs Group Inc. is making inroads into the $1 trillion bitcoin market, and on May 7, Goldman Sachs informed its marketers that a newly created cryptocurrency trading desk had successfully traded two bitcoin-related derivatives, according to an internal memo obtained exclusively by CNBC. The cryptocurrency team, which exists in the firm’s global currency and emerging markets trading division, reports to Goldman partner Rajesh Venkataramani and is part of Goldman’s overall digital assets business led by Mathew McDermott. Through the desk, Goldman Sachs is offering investors a no-principal delivery forward (NDF) service, a derivative linked to the price of bitcoin that can be paid in cash. The bank will use Cumberland DRW as its trading partner to hedge the huge volatility risk of bitcoin by buying and selling bitcoin futures in CME Group block trades.
Morgan Stanley is also making moves in the crypto space. Sources close to the matter have revealed that Morgan Stanley will launch three fund investment channels, two from Galaxy Digital and a third from asset manager FS Investments and bitcoin firm NYDIG. on April 16, Morgan Stanley confirmed that it will offer its wealth Morgan Stanley confirmed on April 16 that it will offer bitcoin exposure to its wealth management clients through two external cryptocurrency funds. During Morgan Stanley’s first quarter earnings call, CFO Jonathan Pruzan said that Morgan Stanley allows qualified investors to invest in two cryptocurrency funds. If clients show more interest, Morgan Stanley will work with regulators to offer more crypto-friendly services.
And Bank of New York Mellon Corp. announced in early February that it will hold and transfer bitcoin and issue other cryptocurrencies on behalf of its asset management clients and is working with crypto custodian Fireblocks. BNY Mellon’s digital asset custody platform is reportedly set to go live later this year.
Citigroup is the latest banking giant to announce its involvement in the crypto space. Citigroup is considering launching a cryptocurrency service due to a surge in customer interest. Citigroup’s global head of foreign exchange, Itay Tuchman, said the bank has not yet decided whether to offer cryptocurrency-related services to clients, but he said trading, custody and financing services are all under consideration. “From our perspective, there are different options, and we are considering where we can best serve our clients. It’s not going to be a proprietary transaction (prop-trading).” Tuchman said Citi is in no rush to make a decision on how far it should go into the crypto market. “I don’t have any FOMO (fear of missing out) mentality because I believe cryptocurrencies are here to stay and we’re just at the very beginning of the market. It’s not a space race. It’s not like there’s only room for one flag, there’s room for more (in the market).”
UBS could not immediately be reached by reporters for comment.
Bitcoin remains the cryptocurrency leader, but the momentum of other tokens is attracting increasing interest. Supporters say investors are feeling increasingly comfortable holding a variety of tokens, while critics say there may be a bubble in the space. But according to the people familiar with the matter, UBS’s move appears to be due to concerns that it could lose clients if it doesn’t offer this investment service to wealthy clients.
Philipp Rickenbacher, chief executive of Julius Baer Group, UBS’s local rival, said at a conference last week that the wealth manager is considering working with partners to offer clients exposure to cryptocurrency assets The wealth manager is considering working with partners to provide clients with exposure to cryptocurrency assets, though it doesn’t plan to execute its own bitcoin-related transactions just yet.
UBS CEO Ralph Hamers is taking a deeper look at where he can cut costs and digitize his business, including the high-end business that serves the world’s wealthiest people. He wants to use artificial intelligence to determine how to sell more products to the world’s wealthy, and is changing the way the bank spends on technology projects from an annual fixed-fund allocation to a more flexible quarterly allocation. The bank spends about $3.5 billion a year on technology to maintain and update its existing infrastructure and to provide employees with innovative tools to deliver new products to customers.
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