Credit Suisse embraces digital money despite bubble fears

Bloomberg

Credit Suisse Group AG Chief Executive Officer Tidjane Thiam said last week that bitcoin speculation is the “very definition of a bubble.” Even so, he can’t avoid it or the technology behind it.
A Credit Suisse conference on digital money and blockchain last month in New York was “epic,” said Lou Kerner, a former equity analyst at Goldman Sachs Group Inc. who invests in digital coins as a partner at Flight VC.
He estimated there were about 300 people in attendance. “To me, it was the best single day I’ve spent in crypto.”
Credit Suisse has employees who focus on the technology — or at least help clients who
do. Emmanuel Aidoo heads blockchain and cryptocurrency strategy, and Brian Wirtz leads blockchain efforts for the tech investment-banking unit, according to the conference agenda. Paul Condra, an equity research analyst, has written about bitcoin and blockchain, the shared digital ledger that records transactions made with digital tokens.
The Zurich-based bank declined to comment. Skepticism abounds in C-suites, where many heads of big banks are reluctant to get involved in an asset that guarantees no transparency, is largely unregulated and can be created by individuals rather than central banks or governments.

INTRINSIC VALUE
Thiam said Credit Suisse is interested in blockchain and is working with other banks to develop the technology. But he joins CEOs including Axel Weber of UBS Group AG and Jamie Dimon of JPMorgan Chase & Co. in criticizing digital money. In September, Dimon threatened to fire any JPMorgan trader foolish enough to bet on it, and last month Weber said that bitcoin has no intrinsic value because nothing backs it.
Thiam, addressing journalists in Zurich last week, cited regulation as a key concern. “Most banks in the current state of regulation have little or no appetite to get involved in a currency which has such anti-money-laundering challenges,” he said.
Thiam added: “From what we can identify, the only reason today to buy or sell bitcoin is to make money, which is the very definition of speculation and the very definition of a bubble.” At its October conference and in notes to investors, Credit Suisse has struck a more optimistic tone on digital currency.

SIMPLE THINGS
“The investment infrastructure is emerging,” analysts led by Condra said in an Oct. 10 note to clients. They said clearer regulatory guidelines for cryptocurrencies could “catalyze more broad-based investment in the space.” Bitcoin, the world’s most-traded cryptocurrency, surged to a record value last week. It’s up almost sevenfold this year and is now worth more than $100 billion.
As for blockchain, Credit Suisse said it’s been exploring how it can be applied to the syndicated loan market, and earlier this year joined a UBS initiative to create a new type of digital money to settle
financial transactions using blockchain. The bank, along with around 200 other companies,
is also part of the Enterprise Ethereum Alliance, which helps businesses get involved with the Ethereum blockchain. Other members include UBS, JPMorgan, CME Group Inc. and Microsoft Corp.
“Some of the applications that we’re looking at will greatly simplify how we process even simple things like US cash equities, shortening things like settlement times, or removing the word ‘clearing’ from our taxonomy,” Credit Suisse’s Aidoo said at a Bloomberg panel in September.
Credit Suisse’s former digital chief, Marco Abele, left the bank this year to launch Tend, a blockchain-based investment platform that allows wealthy individuals to co-own luxury items like vineyards or classic cars.
“With the blockchain, all the assets are with the customers and not with you as a bank anymore,” Abele said in an interview.