BNY Mellon's Asset Management Unit Doubts Bitcoin (BTC) as Viable Payment Method

A recent Bloomberg report reveals that Insight Investment, a subsidiary of BNY Mellon, is wary about investing in bitcoin (BTC). The global asset manager says it isn’t sure about the long-term merits of the world’s leading cryptocurrency as a means of payment.

BNY Mellon and BTC

BNY Mellon became the first global bank to offer bitcoin services this past February. The New York-based bank with over $41 trillion in assets under management cited a surge in client interest for its decision to introduce crypto custodial services. America’s oldest bank now allows its clients to hold, transfer and issue various cryptocurrencies.

Ironically, one of the bank’s own asset management units now says it is skeptical about bitcoin’s viability as a payment method. Francesca Fornasari, head of currency solutions at Insight, explained that the king coin might not be suitable for some institutional investors. 

She added that investors looking to gain exposure to bitcoin should use specialist hedge funds that are well-versed with blockchain tech and the highly competitive crypto market environment.

Why Insight Investment Is Skeptical About Bitcoin

Insight Investments has opted to go against its parent company’s historic move to offer integrated service for bitcoin based on volatility and regulatory concerns. The asset manager is particularly wary of the wild price swings that have seen BTC shed over 40% from its mid-April lifetime high of $64,000. 

The BNY Mellon unit also argued that the ongoing crackdown on crypto in China and increasing regulatory scrutiny from global financial watchdogs could hamper bitcoin’s appeal for institutional clients.

“If you’re investing in Bitcoin, there’s a whole number of different factors and considerations that are going to affect the value of your investment, that have nothing to do with inflation or inflation hedges,” Fornasari warned.

According to Insight, other issues that may hinder bitcoin’s widespread adoption include low liquidity, slow and expensive transactions, and environmental concerns. 

For these reasons, the currency solution head and her team have opted not to trade bitcoin. However, Fornasari believes that providing custodial services for crypto is reasonable, as the asset class will likely become an increasingly vital part of the global financial landscape. 

New Cryptocurrencies Could Challenge Bitcoin

In a report published last month, Fornasari wrote that her unit expects less volatile, more energy-efficient cryptocurrencies that offer low costs and greater transaction speeds to challenge bitcoin.

London-based Fornasari isn’t the only one wary about cryptocurrencies’ drastic price swings. Per a report by JPMorgan’s head of global research, the high volatility in some digital currencies such as bitcoin is damping their allure for many corporate treasuries.

For instance, Qatar Investment Authority, a leading sovereign wealth fund, recently noted that crypto volatility makes the nascent asset class prohibitive to its institutional investors.

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