HSBC Swims Against Crypto Tide
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The bank banned customers of its online trading platform InvestDirect from adding MicroStrategy stock to their portfolios, calling them a «virtual currency product.
HSBC has no appetite for direct exposure to virtual currencies [VCs] and limited appetite to facilitate products or securities that derive their value from VCs,» a HSBC spokesperson said in a statement.
Last week, a message from the bank to InvestDirect customers dated March 29 surfaced on social media, saying that it will only allow the holding, sale and outgoing transfer of MicroStrategy shares, and will ban new purchases or incoming transfers.
MicroStrategy, a business intelligence and cloud-based software company founded in 1989 by bitcoin evangelist Michael Saylor, currently holds about $5.5 billion in bitcoin, or about 80 percent of its $6.8 billion market capitalization.
The company adopted a policy last year to primarily hold bitcoin instead of cash, and has been purchasing the cryptocurrency with its extra cash and paying its directors in BTC.
HSBC said the ban on MicroStrategy follows its policy on cryptocurrencies, which has been in place since 2018. Its move comes against the growing number of financial firms and companies that are embracing cryptocurrencies.
Other companies that also have large holdings of bitcoin on their balance sheets include carmaker Tesla and payments processor Square, though it is not clear if a similar ban would apply to their shares.
Goldman Sachs has said it would offer investments in bitcoin and other digital assets to its wealth clients, while Morgan Stanley will roll out a bitcoin offering to wealth management clients.
Outside of the U.S., notable global banks that have also launched crypto offerings include Standard Chartered and DBS.
MicroStrategy shares soared on Tuesday, up about 18 percent to $848.5, as the price of bitcoin reached a new high of $63,000, 7 percent higher than the day before.
The surge in investor interest comes ahead of a hotly anticipated direct listing of CoinBase, the U.S.’ largest cryptocurrency exchange, on Nasdaq on Wednesday.
Questions & Answers
Q.When did HSBC’s policy on cryptocurrencies first come into effect?
When did HSBC’s policy on cryptocurrencies first come into effect?
HSBC’s policy on cryptocurrencies, which has led to the ban on MicroStrategy shares, has been in place since 2018. The bank has no appetite for direct exposure to virtual currencies.
Q.Why does HSBC consider MicroStrategy stock to be a virtual currency product?
Why does HSBC consider MicroStrategy stock to be a virtual currency product?
MicroStrategy currently holds about $5.5 billion in bitcoin, which accounts for approximately 80 percent of its market capitalisation. The company adopted a policy last year to primarily hold bitcoin instead of cash.
Q.Are other financial firms also shying away from cryptocurrency-linked investments?
Are other financial firms also shying away from cryptocurrency-linked investments?
No, this move by HSBC goes against a growing trend in the financial sector. Goldman Sachs and Morgan Stanley are offering bitcoin investments to clients, and global banks like Standard Chartered and DBS have launched crypto offerings.
Q.What specifically does the ban mean for InvestDirect customers who hold MicroStrategy shares?
What specifically does the ban mean for InvestDirect customers who hold MicroStrategy shares?
InvestDirect customers will only be allowed to hold, sell, and transfer out MicroStrategy shares. They will be banned from making new purchases or receiving incoming transfers of the stock.