The Westlake, Texas brokerage takes a hyper-pragmatic, outward-looking approach and the Malvern, Pa. Giant relies on its inner compass, its view of reality.
Charles Schwab & Co. and Vanguard Group recently clarified their divergent positions on selling and holding bitcoin as investments – and they remain poles apart from Fidelity but also far removed from each other.
The $ 7 trillion-plus index fund giant really doesn’t have any of that, while Chuck’s $ 7 trillion broker has revealed his clue to get in the game.
Fidelity, with $ 10 trillion in AUA, has no qualms and continues to move forward. See: Fidelity Investments applies its proven Peter Jubber to its unproven bitcoin unit and its launch of Fidelity Digital Funds says it’s all in blockchain currency
In contrast, the giants of Westlake, Texas and Malvern, Pa., Remain largely resistant to the sale, holding and administration of bitcoin as investment assets, based on recent statements. published by each.
The difference is that Schwab unequivocally describes how he’ll go all-in, if he goes at all.
Schwab promises to provide both crypto custody and crypto spot trading backed by comprehensive education to make it user-friendly, he writes. Clients can access the bitcoin exposure at Schwab through third-party managers like Grayscale.
“Schwab is at the bare minimum,” says Craig Iskowitz, a consultant who also sits on Blockchange’s advisory board, which connects model managers with crypto to financial advisers. “Loyalty is way beyond that with bitcoin mining and a whole ecosystem.”
Schwab is prepared to respect a demand-merit-supply logic, if the market matures. Schwab is also open to what could herald a “mature” crypto market.
“We believe that the future SEC approval of a cryptocurrency ETF will be a key step in the development of the market and an attractive and inexpensive option for clients interested in this space,” the company said in a note. of research.
Schwab is also specific about what he sees as an attractive offer.
“You can expect Schwab to have more investment options for clients, including spot and custody crypto trading.” said his report.
“And, of course, if we bring new solutions to market, as always, you can expect them to be of great value, designed to meet customer needs, and surrounded by the guidance and training that our customers do. expect and deserve from us. . “
Schwab’s lead on crypto specificity likely reflects in part what he hears from the 10,000 RIAs that hold $ 3 trillion in Schwab, said Tim Welsh, president of Nexus Strategy in Larkspur, Calif.
“I spoke with an RIA last week and they said, ‘I get at least three bitcoin requests every week. “The guards have to do something.”
Schwab still controls his cryptocurrency fate, assures Welsh.
“It’s not like taxis and Uber. You can be a quick follower here,” he says. “Schwab could probably reproduce [the basics of custody and trading at Fidelity] in [a metaphorical] 20 minutes if they haven’t already written the code. “
Yet David Lindenbaum, a 16-year-old Schwab executive responsible for all aspects of product development and management who recently left and advises Blockchange, doesn’t think Schwab has the bandwidth to go that fast.
“Right now, they have their hands full with the integration of TD, so it will take a few years for them to get into space,” he says.
“As (cryptocurrency) becomes more regulated and adopted in the United States, I anticipate Schwab to enter the space through an existing crypto custodian or by making an acquisition.
Vanguard remains firmly convinced that bitcoin emperors do not wear clothes.
“There is no economic or sustainable investment rationale for expecting cryptocurrencies to generate positive real returns,” Roger Aliaga-Díaz, chief economist of Vanguard Americas, wrote in an article in the Vanguard website titled, The argument of caution with cryptocurrencies.
Counterintuitively, Vanguard’s questionable stance is a positive sign for entrepreneurs entering the category without external validation, Iskowitz says.
“There are real believers, people on the fence and opponents,” says group director Ezra. “It’s only disruptive if someone is against it.”
An FAQ from the Schwab Center for Financial Research uses strong language to tell about the viability of bitcoin as an investment.
“Bitcoin and other cryptocurrencies are speculative investments,” he notes in the Cryptocurrency FAQ.
“Bitcoin does not fit into traditional asset allocation models because it is neither a traditional commodity, like gold, nor a traditional currency. Bitcoin’s spectacular volatility is mainly due to supply and on demand, not its inherent value.
“Traditional measures of value don’t apply, so there aren’t any methods of assessing its value that we endorse or find convincing beyond market value,” Schwab writes as a caveat.
Yet the Schwab FAQ recognizes that forces greater than logic, book learning, and sanity are at play with cryptocurrency. See: Charles Schwab & Co. is a budding cryptocurrency convert and will enter the market in a big and ‘disruptive’ way, its CEO says – but not before the SEC says it’s barking or making charlatans
“Nonetheless, in the 13 years since the fundamentals of Bitcoin were first described, the cryptocurrency market has grown beyond an initial experimental phase and has continued to mature as as a unique and important new asset class. “
Vanguard dismisses cryptocurrency’s decade-plus history, on its own, as a reason to even consider abandoning proven stores of value, as the opportunity cost is just too high.
“For investors, adding exposure to cryptocurrencies would mean reducing allocations to traditional asset classes, such as stocks, bonds and cash, which Vanguard sees as building blocks of a prudent investment program and well balanced. “
“Looking at their major investors, Vanguard doesn’t need them in the short term,” Iskowitz says. “But personally, I see nothing but benefits to having a 1-2% exposure of Ric Edelman.”
Asked about its own corporate statement on digital currencies, Fidelity recalled via email that its actions – a big multi-year push in bitcoin – speak for themselves. See: Fidelity pockets $ 13 billion in AUM digital assets in its custody, as federal regulators attempt to shift custody of Bitcoin from ‘weird websites’ to traditional banks
A spokesperson also sent a link to a March article in the Wall Street Journal where Fidelity expressed its perspective on the matter.
“The digital asset ecosystem has grown significantly in recent years, creating an even more robust market for investors and accelerating demand among institutions,” a spokesperson for Fidelity wrote in the WSJ, addressing its SEC application to launch a bitcoin ETF. See: Why Fidelity’s Bitcoin ETF App Might Have a Chance
In other words, Fidelity is simply responding to a growing investor demand for access to “digital assets”.
“A growing range of investors seeking access to bitcoin have underscored the need for a more diverse set of products with exposure to digital assets,” the Boston-based company writes.