What the financial services industry really thinks of crypto

Crypto is now being thought of as an asset class. It is gaining that stamp of respectability from the likes of banks, as they move in to take advantage of high gains. Is this just the beginning of the complete integration of crypto into the traditional finance system, or is this just transitory, and will crypto be dumped as it eventually collapses in on itself? 

An article published on Advisor Perspectives yesterday by Scott MacKillop gave his own particular perspective on the rise of cryptocurrency. MacKillop is CEO of First Ascent Asset Management, and his company provides investment management services to financial advisors and their clients. 

The title of MacKillop’s article was “When you buy cryptocurrency, you own nothing”. So, we know where we stand. The article is a critique of cryptocurrency from the perspective of the financial services industry – an industry no doubt hurting from advising clients to invest in the likes of traditional banking and insurance products. 

Still, before cryptocurrency came along it would have been quite lucrative no doubt... 

“cryptocurrency is being repositioned to be more palatable to financial advisors and their clients.” 

It is hoped that the advisors don’t choke too much on the taste. MacKillop talks of the “dark web” image of cryptocurrencies being “painted over” in order to make them more acceptable.  

“crypto is being packaged to make it look more like our old friends, mutual funds, ETFs, and SMAs.” 

This veteran of the financial services industry obviously baulks at the thought of cryptocurrencies being wrapped up to look like “our old friends”. He doesn’t address the fact that these old friends are doing very little to offer anything like a ‘decent’ return to the average investor. 

MacKillop espouses the likes of Apple Inc, which to him is a real asset, holding “tangible” and “intrinsic” value. He doesn’t mention how this value is kept afloat and pushed up artificially by the Federal Reserve and its inexhaustible supply of fiat currency, printed out of nothing. 

He compares Apple to Bitcoin, saying that the cryptocurrency doesn’t involve any “real life coins, tokens, wallets or keys.”  

“Quite literally, when you buy bitcoin, you get nothing” 

“unlike a true currency, Bitcoin is not backed by the full faith and credit of anybody or anything. Mr. Nakamoto will not make you whole if the market for bitcoin dries up.” 

Mackillop is obviously completely entrenched in his view, that an asset that has no backing by anybody’s credit, can be relied upon. Fiat currencies have the full backing of governments. Does that make them reliable? If the last 100 years of the US dollar are anything to go by, then that is a resounding NO. 

All fiat currencies in the history of the world have gone to zero. Great empires have fallen because of them and their fraudulent use. Cryptocurrencies like Bitcoin evolve through a mathematical process. There is no space for an individual to manipulate it through creating more supply. There are no third-party banks needed to offer services. It just runs. 

To be fair to Mr Mackillop, he does also cite the successes of cryptocurrency. He acknowledges the possibility that Bitcoin could go far higher in price. He allows that if the client wants to make an allocation to cryptocurrency, then perhaps a 1 to 2% allocation would be wise. 3 to 5% would be unrecommended. 

It’s about the tone of the article. It’s about the obvious complete lack of understanding of what is happening to the existing world of finance. Not the fact that it is happening, but how and why it is happening. 

It’s totally understandable, that as a financial advisor in the world of traditional finance, to have your world view challenged and turned upside down by something so utterly different, must be most disturbing and unpalatable. 

However, as has been shown by some who were detractors in the beginning, by keeping an open mind, and by actually looking deeply into the opposing view, you can realise the truth. Better to do this sooner than later... 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.