Commentary November 03, 2021 at 07:44 AM Share & Print
What You Need to Know
- While he says it can’t be ignored, Walt Bettinger remains cautious about offering direct trading of crypto while regulatory issues remain.
- He predicted there would be more, safer ways to invest in crypto.
- He also said ESG is a key step toward personalized investing but raises complicated questions.
Cryptocurrency is “certainly hard to ignore,” but Charles Schwab CEO Walt Bettinger remains cautious about offering direct trading of Bitcoin and other cryptocurrencies until lingering issues are resolved, he said Tuesday at the Securities Industry and Financial Markets Association’s annual conference, held virtually.
“It’s become large enough and consumer awareness is high enough that you can’t ignore it,” Bettinger said of crypto. But, “from a corporate standpoint, we don’t really take a viewpoint on whether it’s right for investors …. Personally, I really have no opinion on Bitcoin as an investment any more than I do artwork or the explosion in values of baseball cards of late,” he added.
He predicted there will be “more and more ways to invest in crypto — maybe ways that are a bit safer than direct purchases.”
However, for now anyway, “when you look at it from a regulatory standpoint, it seems pretty clear that there’s a certain group of organizations that are not headed toward direct trading at this point and, generally speaking, they’re under a common regulator with the Federal Reserve,” he pointed out.
On the other hand, “some of the organizations that are under a different regulatory regime seem to be stepping out a bit more on the direct trading side,” he noted.
When it comes to the “complications around cryptocurrency, I think we look at it more from a bigger picture standpoint,” he went on to say.
For one thing, he explained, it is still not clear exactly how the U.S. government intends to regulate crypto. That is concerning, “particularly given the anonymity that is possible through crypto investing and the conversion of cash to stablecoins in an offshore, less-than-transparent manner” that can be used to “trade anonymously within” digital wallets, he said.
We are dealing with “really complex issues that rise to a level beyond, I think, the way a firm like Schwab or other financial services companies try to serve investors,” according to Bettinger.
“At the same time, I can see great difficulty for our government striving to regulate crypto” because of the “fundamental way that [crypto] operates, no matter what regulators might prefer to do or say,” he said.
Meanwhile, “I do think it’s important for us to be able to know sources of money, what money belongs to which people just for society overall,” he said, explaining: “There are tremendous benefits in that in ensuring a well-functioning society where crime and taking advantage of certain people … is diminished.”
And all of that “has to be worked out and resolved, in my view, before crypto can really go completely mainstream,” he said.
Blockchain capabilities, on the other hand, are “meaningful and have some transformational potential within our industry over time,” Bettinger said, referring to the decentralized, distributed digital ledger technology that is used by Bitcoin and other cryptocurrencies.
Earlier at the SIFMA conference on Tuesday, Gary Gensler, the Securities and Exchange Commission chairman, stated that what’s important for the SEC now regarding crypto trading and lending platforms is ensuring that the investing public is protected.
ESG Challenges Remain
At about the same time Schwab Asset Management announced its first fund focused on environmental, social and governance factors, Bettinger told SIFMA conference viewers that ESG is “just simply another factor for investors to weigh when they look at companies to invest in.”
ESG is also, “arguably … another step toward personalization and so that’s how it fits in direct indexing,” he said.
Schwab is piloting a direct indexing program, Schwab Personalized Indexing, that it plans to launch in 2022.
There are, however, “some complicated things to work out around ESG” still, Bettinger said. “It brings into play social, moral, political objectives.”
Forty years ago, when he started his career, “it was pretty straightforward” from a fiduciary standpoint that it was in the “best interests” of plan employees to be optimizing returns, he recalled.
“ESG makes it more complicated than that,” he said. For one thing, an ESG investment may impact whether you’re optimizing returns or not, he pointed out.
“There’s so much there in the ESG world that needs to be worked out” and that is “further complicated by the fact that I haven’t yet met two people who define ESG the same way,” he told viewers.
We are “working our way towards definitions that [may] never be precise but maybe at least help” investors, he said, stressing the importance of how the E, S and G are defined, so investors can make informed decisions. “To me, that’s one of the big issues that we need to tackle.”
He added: “It’s a great thing for people to be able to have more ways to ensure their investing is in line with the objectives they have for their money. After all, it is their money.”