Having over 90,000 BTC on the balance sheet could observe a company's inventory blacklisted by banks that remain crypto detractors.
MicroStrategy's continuous Bitcoin acquisition has attracted the ire of investment banking giant HSBC. Despite being among the largest business intelligence firms in the world, HSBC has said that MicroStrategy is now a"virtual money product," a designation comparable to this pseudo-Bitcoin exchange-traded fund standing connected to the company due to its sizable Bitcoin (BTC) balance sheet.
Michael Saylor, the organization's CEO, has also become a vocal Bitcoin proponent. Saylor's Bitcoin evangelism has included attempts to encourage other publicly listed companies to add BTC to their balance sheet. Really, some other businesses in the United States have emulated Saylor's Bitcoin adoption.
With corporate Bitcoin adoption becoming commonplace, the dialogue appears to be changing toward life and annuity businesses and sovereign wealth funds to determine where the next wave of systemic BTC investment will emerge. However, for legacy players like HSBC, Bitcoin and cryptocurrencies, generally speaking, remain anathema even if the actions taken so far seem to be arguably arbitrary.
HSBC blacklists MicroStrategy stock
HSBC blacklisted MicroStrategy's inventory , preventing customers of the bank's online retail trading platform in Canada from acquiring the company's shares. While HSBC didn't respond to Cointelegraph's request for affirmation on the accounts, the bank has publicly verified the news using similar statements in the first message shared by clients on Twitter.
In the message delivered to HSBC InvestDirect clients who already hold MicroStrategy (MSTR) stock, the bank disclosed that additional MSTR buys will no longer be possible on the platform. The communique said that such clients could hold their present MicroStrategy stock balances or sell their shares.
An excerpt in the bank's policy as contained in the message to HSBC InvestDirect, or HIDC, clients reads:"HIDC won't participate in easing (purchase and/or exchange) merchandise concerning virtual currencies, or products related to or assigning to the performance of virtual money ."
Reacting to the news, Stuart Hoegner, general counsel at crypto market platform Bitfinex, informed Cointelegraph that the conclusion was a"regressive step" in the context of the rising appeal of cryptocurrencies in the mainstream arena, adding:
"Rather than needing to participate in products relating to virtual currencies, HSBC should instead concentrate on delivering optimal services to its clients, many of whom pay high interest and interest rate charges on the bank's loans and credit card solutions. In reality, it is blockchain technology's capability -- by virtue of removing intermediaries -- that can improve levels of accessibility, inclusion and transparency in financial products"
In Distributing MicroStrategy, HSBC called the company as a"virtual money merchandise," thus its decision to prevent clients from buying MSTR. However, HDIC lists stocks of several companies with substantial cryptocurrency involvement including Tesla, Square and Hut 8 Mining, to mention a couple.
Elon Musk's electric automobile manufacturing giant, Tesla, obtained about $1.5 billion worth of Bitcoin rear in February. Hut 8 is a Bitcoin mining establishment, while Square operates Money App, an avenue for buying BTC which alsocontributes greatly to Square's revenue bottom line.
Contrary to MicroStrategy, which only holds Bitcoin on its own balance sheet whilst still executing its role as a business intelligence company, a number of the tradable stocks on the HDIC platform belong to companies, such as Hut 8, which derive value straight from cryptocurrencies.
Commenting on the absence of clarity in HSBC's decision, Jeffrey Wang, head of Americas in crypto finance supplier Amber Group, advised Cointelegraph:"It's a really slippery slope for HSBC. Will they print a clear set of rules that are defined for what they deem to be companies that derive value from virtual currencies?"
He questioned further:"Why have not they also place this trading restriction on other companies that have publicly disclosed holdings of Bitcoin like Tesla? Will they block trading in Coinbase?" As an HDIC customer, Wang also expressed displeasure in the irregular application of HSBC's anti-crypto policies, adding:
"I feel that is HSBC overstepping its reach on its retail broker offering. If a company is lawfully recorded on the Nasdaq and is in compliance with any regulatory requirements, the choice to buy this stock should be left up to the end-user and not the broker."
HSBC's ban on MicroStrategy stock trading becomes much more eccentric, given that customers can still buy exchange-traded funds that contain MSTR on the stage. Indeed. Based into ETF.com, 88 ETFs hold MicroStrategy shares.
The MSTR blacklisting is hardly the first unfavorable consequence of MicroStrategy's Bitcoin investment push. In December 2020, Citibank downgraded the organization's stock mentioning MicroStrategy's"disproportionate" concentrate on BTC.
New layers of legitimacy
HSBC's action puts the bank firmly in the corner of legacy financial institutions still reluctant to Bitcoin and cryptocurrency innovation. The move delivers the most recent sign of the bank's repudiation of digital currencies following efforts to block clients from repatriating crypto trading profits from trades to their bank accounts earlier in the year.
Meanwhile, several significant players in the traditional finance arena are increasingly becoming more vulnerable to Bitcoin and cryptocurrencies as the novel technologies increases new layers of legitimacy. From providing custody services for electronic currencies to establishing digital asset exchange programs, banks across the United States, Europe and Asia are showing a larger appetite for electronic currencies.
For Wang of Amber Group, HSBC is holding fast to a shrinking position of being a banking establishment that remains reluctant to cryptocurrencies, telling Cointelegraph:
"I believe HSBC will probably be in the tiny minority -- if not the sole brokerage -- which will confine its retail investors from buying shares in publicly traded and controlled companies because of exposure to virtual monies "
Rather than urge for eschewing electronic resources, Stenger identified that the advantages held by conventional finance in real-world asset-based tokenization, adding:
"Traditional financial institutions know how to construction controlled digital assets and how to cope with related requirements (investors protection, principles for markets integrity, compliance, KYC, continuity plans). But furthermore, they have origination and distribution capacities and daily business relationships with their clients."
While Société Générale's digital advantage offerings aren't tied to cryptocurrencies, major U.S. investment banks like Goldman Sachs and Morgan Stanley are seeking to provide their clients exposure to Bitcoin funds.
Amid the continuing influx of institutional actors in the Bitcoin space, the question of whether authorities will spend in BTC is likely becoming an issue of"when" rather than"if." Together with insurance companies and pension funds dipping their toes in the Bitcoin pool, sovereign wealth funds seem to be not too far behind.