Charles Schwab, the biggest investment brokerage firm in the U.S. with $3.2 trillion in assets under management, has dismissed cryptocurrencies – at least for now, according to a RIABiz report.
According to Rob Farmer, Schwab’s managing director for corporate communications, the firm is not interested in providing cryptocurrency trading services, also cautioning investors that these remain a purely speculative investments.
Schwab is taking a conservative approach and is not rushing into the novel industry of digital assets. Even earlier in the year, Schwab president Walt Bettinger took a passive stance when asked if the financial institution would join Libra’s Consortium, stating “let’s answer that question out in the future a little bit.”
The answer came and it’s a temporary dismissal of cryptocurrencies, although experts believe that Schwab might sooner or later be forced to enter the markets.
Will Trout, from Boston-based consultancy Celent anticipates that Schwab will be forced to move into space at some point, at least with some sort of presence, either providing custody of client assets or invest in an exchange.
Another critic of Schwab’s hesitation— Tim Welsh, of California-based consultancy Nexus Strategy and president of Larkspur — stated that the company is missing out on innovation:
“He’ll never willingly upset the apple-cart, unless the market forces him to do so. Until [Schwab’s] biggest advisors demand they do something, they will continue their sleepwalk through innovation.”
However, the relative small size of the cryptocurrency market at around $300 billion is one of the reasons Schwab doesn’t need to rush. With over $3.2 trillion in assets under management, the institution can afford to take a back seat and get involved once the industry establishes itself.
Lex Sokolin — global co-head for financial technology at blockchain software firm ConsenSys — stated that established investment firms always have the opportunity of making cheap acquisitions.
Aite Group financial technology analyst Gabriel Wang has noted that the digital asset market cap amounts to just 1% of the U.S. equities’ market size:
“The overall market size of cryptocurrencies, at this point, is still not big enough for firms like Schwab […] to justify the risks they will be taking […] It could be worth it for these firms to wait.”
A similar opinion is shared by Mike Alfred, co-founder and CEO of Digital Assets Data:
“[Schwab’s] being more conservative; watching to see what’s happening,” he explains.
Schwab’s 8,000 registered investment advisors (RIAs) custody $1.7 trillion in assets through Schwab Advisor Services — roughly equal to Pershing, TD Ameritrade and Fidelity combined, according to the report.
Schwab rival Fidelity, on the other hand, already entered the digital asset market with Bitcoin trading and custody services. According to RIAbiz, Fidelity is also preparing to enable margin purchases and shorting, as well as an Ethereum wallet, which will support ERC-20 based tokens.