As regulator crackdowns continue, UBS warns of a “crypto bubble” that might burst.
In addition to China’s recent restrictions and ban on the new asset class, the Swiss banking giant indicated that harsher controls might be implemented in the West.
Investors should avoid cryptocurrencies and focus their portfolios on lower-risk assets, according to the investment bank.
Because regulators have been cracking down on the emerging asset class, UBS has advised investors to “steer clear” of cryptocurrencies.
The Swiss banking behemoth called attention to recent regulatory crackdowns, warning its clients that digital assets such as Bitcoin are not suitable for professional investors.
Regulators throughout the world could eventually “bust bubble-like crypto markets,” according to UBS. In a message to clients, the bank stated that regulators have proved their ability to crack down on cryptocurrencies. Clients were advised to “steer clear” of digital currencies and construct a portfolio around “less risky assets,” according to the investment bank.
According to the Swiss bank,
We’ve been warning for a long time that changing investor sentiment or regulatory crackdowns might deflate crypto markets.
The global wealth management team at UBS emphasized China’s recent ban on cryptocurrencies and the subsequent price drop. China has tightened its grip on digital assets even more, placing additional limitations on crypto mining in June, with officials in many regions, including Yunnan, Xinjiang, and Sichuan, suspending activities.
The Chinese central bank has ordered large banks and payment service providers to halt all Bitcoin transactions, citing the disruption of the “normal order of the economy and financial system” caused by digital assets. Cryptocurrencies, according to the People’s Bank of China, represent major hazards, including money laundering.
The bank believes that tighter laws for Western markets, such as the United States and the United Kingdom, are on the way.
Binance, a cryptocurrency exchange, has been in the news recently because it is being investigated by the US Justice Department and Internal Revenue Service. The site has also run into problems, with officials in the Canadian province of Ontario issuing a notice accusing the exchange of breaking legislation.
Binance is also up against obstacles in the United Kingdom, where the country’s financial watchdog has prevented the exchange from engaging in any “regulated activity.” The Japanese Financial Services Agency has issued a second warning to the crypto platform, stating that it has not registered to operate in the nation.
Certain trading behaviors in the cryptocurrency market, such as overleveraged trading, are fundamentally at variance with mainstream finance regulation, according to UBS.
Although UBS believes that cryptocurrency prices will rise in the future, it considers the digital asset market to be speculative and “poses significant risks to professional investors.” However, since mid-May, the investment bank has begun to look into different ways to allow its clients to gain exposure to cryptocurrencies. UBS expressed anxiety that if it did not join the bandwagon, it would lose clients, citing the surge in demand./n
