Not Keen on Cryptocurrencies? Your Stock Portfolio May Say Otherwise

By Read More

shares stock market

  • According to a recent analysis by MSCI, no less than 52 companies representing some US$7.1 trillion in market capitalization have at least some exposure to cryptocurrencies.
  • At the other end are the “crypto curious,” those companies that are dipping their toes into offering the market cryptocurrency services like Visa, Mastercard, Goldman Sachs, Morgan Stanley and JPMorgan Chase.

Keen on stocks but not keen on cryptocurrencies? Your equity portfolio may have more exposure to the nascent digital asset class than you would immediately recognize.

According to a recent analysis by MSCI (+2.57%), no less than 52 companies representing some US$7.1 trillion in market capitalization have at least some exposure to cryptocurrencies.

The scale of companies with exposure to digital assets runs from the all-in players like Coinbase Global (+5.36%) and Riot Blockchain (+1.87%), whose entire business models rely on the development and demand for cryptocurrencies for survival, to those firms with bitcoin on their balance sheets, like Tesla (+0.89%) and Microstrategy (-0.32%)

At the other end are the “crypto curious,” those companies that are dipping their toes into offering the market cryptocurrency services like Visa (+1.24%), Mastercard (+0.64%), Goldman Sachs (+1.23%), Morgan Stanley (+2.52%) and JPMorgan Chase (+1.57%).

Even as Tether, issuer of the widely used cryptocurrency dollar-based stablecoin USDT poses a threat to the stability of money market funds, with an estimated US$30 billion of assets in commercial paper and certificates of deposit, systemic entanglement between the realm of traditional and crypto-finance are increasing, as are risks.

The growing importance of the volatile digital asset class brings with it an assortment of challenges for investors, companies and regulators, as they try to grapple with the environmental, social and financial stability risks that come alone with the burgeoning sector.

According to MSCI, questions about everything from greenhouse gas emissions from cryptocurrency mining, to a lack of accounting standards and questions about transparency surrounding how networks are run, mean that even investors who are completely skeptical about the digital asset class, may need to at least start educating themselves on the implications and risks the nascent cryptocurrency sector poses.

Complicating matters, corporate boards and chief executive which have dismissed cryptocurrencies for years are now having to contend with an utter lack of expertise on dealing with and understanding the digital asset class.

Of the 6,500 board members searched by MSCI for its analysis, only 79 people in 64 companies included references to cryptocurrency or blockchain.

Given how companies and investment portfolios may be exposed to cryptocurrencies without even knowing it, the MSCI report concluded,

“People with advanced cryptocurrency-specific skills and experience are likely to be rare — at least within traditional board recruitment pipelines. This may present an opportunity to expand areas of board diversity such as director age.”