The Genuine Crypto Critics Who Unintentionally Make It Stronger
Part IV - Charles Schwab (definitely, maybe?)
Just two more days before you, the hypothetical SEC employee we created on June 1, share a draft of the next investor alert for crypto with your supervisors. This week is all about crypto critics who have genuine concerns about crypto but nevertheless call it an investment. On Monday, you started with Elizabeth Warren. On Tuesday, it was Christine Lagarde and Janet Yellen. Yesterday, it was Bill Gates and Jim Cramer. Before you recap the week tomorrow, you would like to conduct some more research. What should you focus on?
“Let me find an institutional player.” You, of course, looked at Goldman’s positions on crypto carefully and documented how their views evolved. What about another bank? Or maybe a brokerage? How about a little bit of both?
With that, you decide to research Charles Schwab. They are well known for being a brokerage, and acquired TD Ameritrade a couple of years ago, but they also have a banking arm. Have they taken a position on crypto?
A few clicks and you come across this:
Right there, the title already gives it away:
Are Cryptocurrency Investments Right for You?
“Why does everybody think that crypto is an investment?” you ask yourself. “I mean, Warren Buffet, arguably the most successful investor of our lifetime is saying that it is not. Aswath Damodaran, who is known for valuation, is saying that one cannot invest in it. Jamie Dimon, the CEO of the top bank is saying that it is worthless. Doesn’t any of that create some skepticism in people? Not even an ounce?”
The rest of the article is more or less what you were expecting. For example, this bit:
Bitcoin and other cryptocurrencies are highly speculative investments, since supply and demand drive their volatility—not intrinsic value. That said, the cryptocurrency market has matured from its experimental phase into a unique and sizable asset class with a global market capitalization of some $1.5 trillion (see "Crypto roller coaster," below). As a result, several established corporations and institutional investors have begun investing in Bitcoin.
You remember what you wrote on the board a couple of weeks ago: No intrinsic value → not investing. Schwab, which is literally in the investing business, clearly did not get the memo.
So, if Schwab is a genuine crypto critic, which is what it seems like based on this piece, then they are making the same mistake that Elizabeth Warren, Christine Lagard, Janet Yellen, Bill Gates and Jim Cramer are making: Calling speculation, investment. People might as well sell decaf coffee as regular, sell economy tickets as business class, or sell inorganic food as organic.
You are just about to wrap up. Then, a CNBC headline catches your eye. It says:
EDX crypto exchange goes live offering bitcoin and ether trading, backed by Schwab and Fidelity
Huh? Is it even fair to call Schwab a genuine crypto critic then? You definitely want to understand this development some more and come across this video:
Ok, the platform does not offer direct retail accounts, it is intended for institutions. Nevertheless, according to this article, the platform wants to attract “deep-pocketed investors.” In fact, the last paragraph says it all, quoting EDX’s CEO, Jamil Nazarali:
“We are retaining a lot of the innovative characteristics of the digital market but bringing some of the investor protections to it,” he said. “We think that that’s all a really good thing.”
“True, they might be bringing some,” you say to yourself. “They might be bringing some, but it looks like they are missing the most important disclosure of all: telling traders that one can only trade Bitcoin, and not invest in it.”
