One of the world’s largest investment management companies, Vanguard, has rejected Bitcoin and cryptocurrency as an asset class.
With the increasing demand for digital currencies around the globe, Vanguard has made it clear that it will not support the creation of Australia’s cryptocurrency exchange-traded fund (ETF). In finance, ETFs are used to invest in a basket of stocks/assets rather than specifically choosing a certain company. This means that instead of investing solely in Bitcoin, consumers who purchase ETFs can purchase a slice of various cryptocurrencies to widen their exposure and minimise risk.
Vanguard has noted that the reason it will not aid the creation of an Australian cryptocurrency ETF is that digital currencies fall outside of their “definition for an asset class, commodity or even currency”. Head of Vanguard Australia, Balaji Gopal, has stated that in his eyes, cryptocurrency does not generate cash flow nor act as a store of wealth, causing cryptocurrency to be akin to a “baseball card”.
However, not all major financial representatives hold Vanguard’s opinion. Australia’s Financial Services Minister, Jane Hume, opposed Mr Gopal’s comments to in fact call cryptocurrency an asset class.
What is alarming though is Vanguard’s findings as to the distribution of assets held by Australians. The key reason Vanguard is opposing cryptocurrency investment is that 20% of Millennials and 42% of Gen Z hold cryptocurrencies in their portfolio. And for many, this is their first major investment without proper risk assessment or understanding of market analysis. What Mr Gopal warns against is the extreme volatility experienced in this market and the potential for mismanagement and economic detriment.
Regardless of these warning signs, cryptocurrency continues to steamroll through modern society to establish itself as the new digital currency.
