UBS warns regulators could burst ‘bubble-shaped crypto markets’

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Swiss multinational investment banking giant UBS has warned its clients that crypto assets would not be suitable for professional investors if regulatory pressure continues.

In a note sent to clients last week, UBS’s global wealth management team said the latest crackdown in China had hurt crypto prices and operators, warning that a further regulatory pullback in the world could exacerbate the downward pressure on digital asset prices:

Regulators have demonstrated that they can and will crack down on crypto, so we suggest investors stay clear and build their portfolios around less risky assets. We’ve long warned that shifts in investor sentiment or regulatory crackdowns could burst bubble-like crypto markets.

While UBS acknowledged that other crypto gains could be possible, they highlighted the risks the speculative asset class could pose to investors:

While we cannot rule out future price gains in cryptos, we view this as a speculative market that presents significant risks for professional investors.

The Swiss bank also cautioned against leveraged trading, saying that crypto trading practices, such as extending leverage by 50X or 100X, seem fundamentally at odds with traditional financial regulation.

China’s renewed crackdown on Bitcoin mining operations, which began in late April, has seen mixed reviews from the crypto community, with some claiming that the hash energy migration from China is offering the Bitcoin mining industry an opportunity to improve its ecological footprint and further decentralize. the network.

However, the banks are seeing it differently, with UBS fearing that China’s actions could create a cascading effect around the world on the part of financial regulators.

UBS’s prediction already appears to be coming true, with the UK’s Financial Conduct Authority taking action against the world’s largest digital asset exchange, Binance, on June 27.

Related: Binance Disappointed With Barclays Unilateral Action To Block Customer Payments

A number of major UK banks, including TSB, NatWest and Barclays, have limited their clients’ access to crypto exchanges since the FCA took action against Binance in late June.

In May, Cointelegraph reported that it was rumored that UBS was working on launching crypto trading services for high net worth clients.

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