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Julius Baer Braves ‘Bubble-Burst’ Moment in Crypto Wealth Push

Julius Baer’s shift toward offering crypto services is in stark contrast to Zurich rival UBS, which so far has said it’s not interested in advising clients on “speculative” assets.

(Bloomberg) -- Julius Baer Group Ltd. said it is working on offering services in digital assets to its wealthy clients, and sees the current turmoil in global crypto markets as potentially defining moment for the asset class. 

The Zurich-based private bank wants to place itself at the intersection of “digital assets and the fiat world”, according to a statement on the bank’s updated strategy on Thursday. Pilot programs are currently in place with an eye to offering advice, trading and investing in cryptocurrencies to its rich customers.

“It could well be that at this very instant we are witnessing a bubble-burst moment of the crypto industry, and we all know what happened after the dot-com bubble burst 30 years ago,” Chief Executive Officer Philipp Rickenbacher said during a presentation of the bank’s strategy to investors on Thursday. 

“It paved the way for the emergence of a new sector that indeed transformed our lives; I believe digital assets and decentralized finance hold that same potential,” he said. 

Baer’s shift toward offering crypto services is in stark contrast to Zurich rival UBS Group AG, one of the world’s largest wealth managers which so far has said it’s not interested in advising clients on “speculative” assets. Baer has taken a stake in SEBA Crypto AG, one of the two fully-regulated crypto banks in Switzerland. 

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Baer said when investing in SEBA in 2019  it was “convinced” that digital assets-- a catch all term for cryptocurrencies, blockchain technologies, tokenized assets, and non-fungible tokens-- would become a “legitimate sustainable asset class of an investor’s portfolio”. The relationship with SEBA has allowed Baer to refer clients seeking exposure to crypto-related investing and trading without the bank developing out its own infrastructure for custody and risk-management of the asset. 

The bank plans to develop its own research to clients on crypto, DeFi, and blockchain and ultimately provide regulated advice on investing and trading in the asset class, and the platform for them to do so at Baer. 

The pilot programs concern token booking, trading, and compliance to test and learn, and develop the vocabulary around digital assets. 

Speculative Assets

UBS Chief Executive Ralph Hamers said last year that the wealth-management giant would not be actively offering clients the ability to invest or trade in crypto, calling it an untested and speculative asset class. “We don’t advise on speculation,” Hamers said during an earnings call in October. 

“We believe crypto has been ineffective as a portfolio diversifier or inflation hedge,” UBS’s chief investment office led by Mark Haefele said in a note to wealth clients this week as the asset class tumbled on the back of the collapse of stablecoin TerraUSD. 

So far global banks been wary on engaging with the emerging asset class, which is still perceived as too risky and inadequately regulated. Banks are also required to hold high amounts of capital for every cryptocurrency they hold on their balance sheet, making doing business in the asset class costly. Jamie Dimon, JPMorgan Chase CEO, said at the annual shareholder meeting on Wednesday that the bank was working with regulators on clearer rules around crypto.

Rather, traditional finance has looked at the emerging technology applications that have come with the creation of blockchain and crypto coins. 

Baer also wants to invest in this area “where traditional cost-heavy and complex parts of the old banking system are today just rewritten with a few lines of code.” The CEO cited areas such as cross-border payments and escrow services that are ripe for this type of innovation.  

Rickenbacher said the bank is prepared to navigate the disruptions decentralized finance will “inevitably” pose to both clients and the bank’s own operations. 

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