Cryptocurrencies are Speculative Bubble, Blockchain Is Revolutionary, says UBS

UBS expressed mixed views on cryptocurrencies and blockchain in a recent report, considering the first a speculative bubble, while the second – a disruptive technology that has the potential to bring value in different sectors.

UBS, the largest financial holding in Switzerland, recently published a report on cryptocurrencies and blockchain technology, expressing conflicting opinions on the two. The bank views blockchain as a genuine technology but remains skeptical in regards to cryptocurrencies.

The Swiss corporation is as intensely critical of Bitcoin and cryptocurrencies as it is positive about blockchain technology. The bank predicts that cryptocurrencies will never replace fiat money, while blockchain could revolutionize different sectors. The report, published in mid-October, says:

“While we are doubtful cryptocurrencies will ever become a mainstream means of exchange, the underlying technology, blockchain, is likely to have a significant impact in industries ranging from finance to manufacturing, healthcare, and utilities.”

The report referred to digital currencies as a “speculative bubble.” According to the bank, the main hurdles in mass adoption of digital currencies are “the need for companies and individuals to pay tax receipts in government-issued currency and the potentially unlimited crypto-money supply.”

Moreover, the authors hint that cryptocurrency might be the “currency of crime,” as it is used by those operating in the black market or illegal economies, as an alternative to official currencies.

However, the tone turns positive when the report discusses blockchain, a distributed ledger technology that favors decentralization. UBS estimates that blockchain technology could contribute $300-400 billion of annual economic value at the global level by 2027.

UBS considers that the key benefits of blockchain are disintermediation, security, resilience, and lower costs. Moreover, the bank is currently testing the technology for its own projects.

Arianna Simpson, a cryptocurrency investor, said that she considers the “pro-blockchain, anti-crypto” opinion a “convenient way of taking a politically acceptable and ‘safe’ position.”

It is not a surprise that the report comments negatively on cryptocurrencies. Earlier, we reported UBS Chairman Axel Weber comparing them to tulip bulbs (referring to the tulip mania bubble). That being said, UBS CEO Sergio Ermotti did agree that super-rich clients are very curious about Bitcoin.