UBS is making huge profits off billionaires—but it won’t touch crypto

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Swiss banking giant UBS earns billions every year telling the ultrawealthy how best to invest their fortune, but it will not lift a finger when it comes to their digital wallet.

In a world where there is enough demand for crypto assets to spawn two major dog-themed altcoins and where soccer transfer rumors spark a speculative run-up in price of fan tokens, UBS argued on Tuesday it cannot properly gauge the value of the cryptocurrency universe, and therefore it’s staying out of the space.

Chief executive Ralph Hamers told investors the bank has ruled out actively offering trading, custody, or lending services related to “alternative” crypto assets as part of UBS’s larger plans to build up a full-scale digital bank in the United States.

“Not many [market] players understand the true value of crypto: What determines the value of crypto? What are the uses of crypto? And therefore it is not something one can regard as an investment but is much more about speculation,” Hamers said on Tuesday. “We don’t advise on speculation, and that’s why we don’t go there.”

Although UBS feels comfortable helping clients to price complex structured derivatives based on fundamental analysis (even in markets brimming over with froth), he argued there is no such rule book to reach for when it comes assets like Bitcoin and Ether.

Hamers said UBS might honor some customer interest in the case of a “reverse enquiry,” a term that mitigates legal liability in the tightly regulated alternative fund management space. But he argued reputational damage was not the core of his concern.

“It’s not a branding risk. It’s just that if I don’t understand it, how can I advise it?” he told reporters during a press briefing. “I don’t know what liquidity will truly be there when things go wrong.”

Hamers was speaking after UBS published strong quarterly results helped by record profits at its global wealth management arm as well as a sharp increase in prime brokerage fees on its equities desk. UBS shares gained nearly 3% at the open.

Even if the bank is staying far away from crypto (for now), investors are happy. Shares are up more than 45% in the past year, far outperforming crosstown rival Credit Suisse.

Crypto’s two-year rally has put the banks in a tough spot, torn between huge returns and an uncertain regulatory future. Other firms reluctant to offer cryptocurrency services such as JPMorgan have since caved to popular demand, despite crypto’s inherent volatility.

Part of the reluctance among banks may be an inherent desire for self-preservation. Many crypto fans believe blockchain technology, upon which tokens are based, champions the cause of decentralized finance. 

One key advantage of “DeFi” in their view is it serves to undermine the traditional role of commercial lenders as financial intermediaries, the gatekeepers of capital allocation and by extension the economy.

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This story was originally featured on Fortune.com

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