United States-based investment giant Charles Schwab is — for now — steering clear of cryptocurrencies, even as rivals such as Fidelity rush to embrace the new sector.
Schwab — the U.S.’ largest investment brokerage firm, with $3.2 trillion in assets under management — will not seek to offer direct trading of cryptocurrencies for the foreseeable future, according to a Sept. 7 report from RIABiz.
“Sleepwalking through innovation”
Schwab’s managing director for corporate communications, Rob Farmer, told reporters that cryptocurrency trading services are not being pursued by the firm at this time. He cautioned that “investors should view these currencies as a purely speculative instrument.”
Earlier this year, when asked whether the firm would seek to join the governance consortium for Facebook’s forthcoming Libra stablecoin, Schwab president Walt Bettinger had also played for time, stating, “let's answer that question out in the future a little bit."
One critic of this approach — Tim Welsh, of California-based consultancy Nexus Strategy and president of Larkspur — has claimed that:
“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."
Other analysts such as Will Trout, from Boston-based consultancy Celent — anticipate that Schwab "will be forced to move into space at some point, although most likely in a small way, custody of client assets or a stake in an exchange."
Or take a wait and see approach?
Not everyone shares this critical view of the firm’s slow-burning strategy. Lex Sokolin — global co-head for financial technology at blockchain software firm ConsenSys — has said that ultimately, established investment giants “have the long-term advantage right now, because they can acquire for cheap."
Aite Group financial technology analyst Gabriel Wang has noted that the new sector’s roughly $300 billion market cap amounts to less than 10% of Schwab’s $3.2 trillion in AUM and 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.”
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, as RIABiz notes.
Schwab Chief Strategist remarked back in 2017 that Bitcoin is “kind of its own thing” and thus hard to predict due to its independence and non-correlation with the wider, traditional market.
This July, Fidelity Investments’ cryptocurrency business, which went live in spring of this year, applied for a license that would allow it to offer its crypto custodial services in New York state.