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Why UBS is Bullish on Blockchain, but Not Cryptocurrency

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Bitcoin

UBS has a split view on blockchain, and cryptocurrency.

The bank views coins as a “speculative bubble,” adding that it’s “highly doubtful whether they will ever become mainstream currencies.”

At the same time, they note that Bitcoin falls short of criteria needed to be considered money.

“Fixed supply and unusual demand dynamics make the system susceptible to high price volatility, in turn making it difficult for bitcoin to step into the role of money or to be a viable new asset class.”

Still, UBS does not rule out that it could potentially happen one day.

If Bitcoin can achieve scalability, they note, it could become a “viable payment mechanism.”

Yet, when it comes to the technology driving those cryptocurrencies, it’s optimistic.

“While we are doubtful cryptocurrencies will ever become a mainstream means of exchange, the underlying technology, is likely to have a significant impact in industries ranging from finance to manufacturing, health care, and utilities,” UBS noted, as quoted by MarketWatch.

They believe blockchain technology could add up to $400 billion on global economic value every year by 2027.

“Just as internet has transformed our lives with email, e-commerce, or smartphone apps, we believe blockchain as an infrastructure technology can power future disruptive technologies through distributive ledgers, smart contracts, tokens or identity management,” it wrote, although it didn’t provide specific investment recommendations.

Sectors that Could Potentially Benefit

UBS believes healthcare will be a beneficiary by providing anonymized clinical data.  It’ll allow agencies, like the US FDA to access only relevant information.  It’ll also help protect patient confidentiality.

The financial industry could also benefit.

Even UBS is exploring how ledgers and smart contracts can apply to complex financial instruments.  Insurance claims, foreign exchange transfers, trade finance and compliance processes could all see benefits.

 

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