Deutsche Warns Against Crypto-Currencies, Risk of Total Loss

LAGOS (Capital Markets in Africa) – Deutsche Bank AG’s Wealth Management currently does not advise to invest in crypto-currencies, according to Markus Mueller, Global Head of Chief Investment Officer. Problematic issues include high volatility, possible price manipulation and data loss or data theft, he told Bloomberg News in an interview.

“We do not recommend that. It’s only for investors who invest speculatively,” he said. “There is a realistic risk of total loss.” According to Mueller, recent price increases reflect a lot of imagination, driven by the current situation in the market. There is hardly any return scope left in other asset classes such as fixed income, he said.

Mueller is not the only person warning against crypto-currencies. Bank of Spain Governor Luis Maria Linde said crypto-currencies are an asset that carries enormous risks. And Austria’s Financial Planners Association compared bitcoin investments with a “casino visit”.

In order to establish crypto-currencies as some kind of asset class in the future, more regulation, security and transparency, for example via official trading venues, are required, according to Mueller. “Important issues such as liability and documentation are unclear,” he said. “We are still at the very beginning.”

The price of Bitcoin had fluctuated sharply in recent weeks. Crashes of more than 20 percent in a single day have occurred. There were concerns about possibly tough crackdowns by regulators in Asia, among other factors.

Japan’s financial regulator is in no hurry to follow the U.S. and enable the listing of futures contracts linked to crypto-currencies, according to a senior Financial Services Agency official with direct knowledge of the matter.

Müller said companies that issue crypto-currencies should work together with regulators. “When security and trust are created, crypto-currencies can be assessed like established asset classes. It is possible that the governance required will exist in five to ten years from now.”

He does not understand why so many followers of crypto-currencies see something negative in regulation. Regulation protects against abuse and crime, he said.

He also pointed out that traditional money is supported by the underlying economic power of a country. Gold is a bit more abstract, but at least of a physical nature, he said. Crypto-currencies, on the other hand, would only function as a store of value if the issuing companies have a sustainable business model, Mueller said.

However, the underlying technology, the blockchain, is already interesting, Mueller said. “Crypto-currencies make transactions even easier and more cost-effective”. There is the potential to revolutionize some industries from the ground up, according to Mueller. It is a technology with probably “the most disruptive character for the finance sector and the public” since the invention of the Internet.

Source: Bloomberg Business News