Vanguard CEO Tim Buckley warns savvy investors that while he may think highly of blockchain technology, but he isn't planning in investing in bitcoin anytime soon.
"You will never see a fund from Vanguard on bitcoin," Buckley told CNBC's Bob Pisani on Monday.
"We tend to stay away from assets that don't have underlying economic value. They don't generate earnings or cash flows," he said.
"The bitcoin – its value is based off of scarcity – and an artificial scarcity that's out there," he explained. "It's really tough to imagine where the long-term return comes from other than speculation."
Buckley compared the lack of fundamental economic value in bitcoin to a lack of fundamental value in gold, an asset class which Vanguard also avoids.
Buckley, who succeeded former chief Bill McNabb at the start of the year, oversees roughly $4.5 trillion in assets under management.
Meanwhile, one of the top lawyers in the booming cryptocurrency industry says the legal structure he helped set up to raise funds for new virtual currencies is “old, inflexible and stupid” and may no longer be fit for purpose, Reuters reported.
The Swiss lawyer’s comments come as regulators around the world increase their scrutiny of initial coin offerings (ICOs), the digital fundraisers that precede a currency’s launch.
There is also growing scrutiny from investors. The Zug-based Tezos Foundation is facing U.S. class-action lawsuits from those who say they were misled and defrauded in its ICO.
Luka Mueller’s MME law firm helped set up foundations in Switzerland for Tezos and some of the world’s biggest ICOs, including those of Bancor and Ethereum. Many foundations applied for non-profit tax status. The money raised in the ICO is treated as a donation that may not be returned.
Regulators in the United States, the UK, and elsewhere are looking at whether an ICO should have similar investor protection to an initial public offering (IPO) for a company.
Mueller told Reuters cryptocurrency groups involving U.S. participants or gaining backing from investors should set up companies instead of the Swiss foundations he helped popularize.
“If you structure your token sale in a way that it would look like an initial public offering, then even if you launch a (blockchain) protocol, the foundation is maybe not suitable,” he said.
“If...the background is more an investor environment rather than a technical environment, yes, do all the registrations. If you want to sell it, if you want to be active and actively promoting it in the US, apply U.S. law.”
He said a foundation could still work for ICOs if a project is of interest mainly to technical experts rather than investors.
Meanwhile, Nordea has forbidden all its roughly 31,000 employees from trading in cryptocurrencies such as bitcoin due to high risks, it said on Monday.
The Nordic region’s biggest bank said the ban will be imposed from Feb. 28, Reuters reported.
“The risks are seen as too high and the protection is insufficient for both the co-workers and the bank,” a Nordea spokeswoman told Reuters in an e-mail, adding that employees who currently own cryptocurrencies will not be forced to sell them, although recommended to do so.
Wall Street has taken a cautious approach to digital currencies, which are unregulated and have very volatile trading patterns.
Bank of America Merrill Lynch banned clients from investing in one of bitcoin mogul Barry Silbert’s top funds last month, according to a memo seen by Reuters.
(Newsmax wire services contributed to this report).
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