Bitcoin, seemingly, is the name on everyone’s lips; however, American investment brokerage behemoth Schwab has decided to avoid rushing into the sector for the foreseeable future, even as competitors can’t seem to wait to get their toes wet.
Schwab, the largest investment brokerage firm in the U.S. by AUM (Assets Under Management), has decided not to pursue direct cryptocurrency trading services at this point in time, according to a report published by RIABiz last week.
With the bitcoin price rising to highs not seen since the 2017 bull run, corporations like Facebook wading into crypto waters, and blockchain tech being harnessed for all its massive potential, cryptocurrency seems like the place to be in 2019.
Not for Schwab, though, as Rob Farmer, managing director for corporate communications, cautioned investors to “view these currencies as a purely speculative instrument.”
Meanwhile, Fidelity Investments, a rival of Schwab’s, went live with its cryptocurrency and digital asset platform this spring.
But that might not necessarily be a bad thing, yet.
Schwab has a total of $1.7 trillion in assets under management through Schwab Advisor Services, an amount that is equal to the combined total of its rivals Pershing, TD Ameritrade, and Fidelity.
Moreover, the cryptocurrency sector has a market cap of $300 billion, which barely amounts to 10% of Schwab’s $3.2 trillion in AUM. As Gabriel Wang from Aite Group sums it up, the market size of the crypto sector isn’t big enough for companies like Schwab to justify taking risks, and that it could be “worth it for these firms to wait.”
Schwab is just too big, and they would have a long-term advantage as they could just acquire for cheap in the future.
When asked whether Schwab would like to join the Libra Council, President Walt Bettinger was elusive, saying, “let’s answer that question out in the future a little bit.”
Above, we saw how this approach to cryptocurrency might actually be a good thing for Schwab, but like everything, even this decision has its critics. Analysts and experts believe that eventually, Schwab would be forced to move into the crypto space whether they like it or not, although not necessarily in a major way.
Either way, the largest investment brokerage firm in the U.S. is firm in its approach as of now. Will things change going forward? Only time will tell.