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Cryptocurrency’s designs on further “mainstreamification” received a significant boost last week when Charles Schwab announced it will forge deeper into the world of digital assets.
On the asset manager’s first-quarter earnings conference call, CEO and President Rick Wurster said the company is planning to roll out a spot crypto trading platform at some point over the next 12 months. Schwab isn’t a total stranger to the world of cryptocurrency, but by bringing crypto trading directly onto its heavily used platform, Schwab is entering new territory.
“Our expectation is that with the changing regulatory environment, we are hopeful and likely to be able to launch direct spot crypto and our goal is to do that in the next 12 months and we're on a great path to be able to do that,” said Wurster in response to an analyst question. “So we're excited about meeting our clients' crypto needs, we believe we are doing a lot of that today but we'll also add capabilities in the near term.”
The Schwab chief executive officer didn’t get into details about which digital currencies it will provide access to. It’d be reasonable and smart to wager the initial batch is likely to be smaller than what’s found on dedicated crypto platforms and comprised largely of the more credible cryptocurrencies, such as bitcoin, ethereum and stable coins, among others. That aligns with the firm’s long-standing conservative posture on the asset class.
Smart Move by Schwab
For HODLers and crypto mavens, news of Schwab rolling offering spot trading of digital currencies can be seen as a potential tailwind for broader adoption of this still young asset class. After all, Schwab has an enviable combination of brand awareness, history and trustworthiness that isn’t yet broadly found among dedicated crypto brokers.
Not to mention, Schwab has one of the largest advisor distribution networks and is dominant force in terms of custody of assets on behalf of advisors, indicating the spot trading decision could broaden advisors’ embrace of digital assets. At the very least, it makes easier for advisors already working with Schwab to access crypto.
It’s also a business decision. As Wurster noted on the conference call, Schwab clients are already engaging with the crypto offerings available on the platform and that menu is also proving to be a source of allure for prospects.
“First, we're seeing robust engagement with the existing crypto ETFs that can be bought in the marketplace, the closed end funds that we make available on our platform and Bitcoin futures, which are also available on our platform,” he said. “So we do think we are a great destination for investors interested in crypto. And we've seen that in the level of new account growth and the level of engagement in our crypto site where we saw a 400% increase in traffic to it recently, 70% of whom were prospects and what that -- were not clients.”
With Crypto, Schwab in the Middle of Rivals
As advisors, the common view of Schwab on a competitive basis is that its two most direct rivals are Fidelity and Vanguard. On that basis, Schwab is in the middle when it comes to digital currency. Fidelity is clearly crypto-enthusiastic while Vanguard is notoriously the opposite as it won’t even allow clients to purchase spot bitcoin ETFs.
It remains to be seen the extent to which Schwab wants to challenge Fidelity on the crypto front, but it is clear Schwab will extend its lead over Vanguard in this space, though the latter probably doesn’t care.
Moreover, the move broaden its crypto trading suite could make Schwab more appealing to younger investors that have largely flocked to glitzier, gameified platforms with more youthful appeal. Alone, that could make Schwab’s crypto trading gambit a profitable one.
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