HSBC Swims Upstream by Blocking Cryptocurrency Backed Transactions

In the February 2021 HSBC Holdings Annual Results report, Noel Quinn, Group Chief Executive, said:

“The growth plans we are announcing today aim to establish HSBC as a dynamic, efficient and agile global bank with a digital-first mindset, capable of providing a world-leading service to our customers and strong returns for our investors. We intend to deliver them at pace.”

Less than two months later HSBC is making waves online for taking a stance against Bitcoin and any company that holds cryptocurrencies as part of its long term asset management and investment strategy.

 Do As You’re Told

This decision was not officially announced by HSBC rather affected customers received an email, the tone of which was simply “deal with it”, which opened as follows:

“HIDC [HSBC Invest Direct] will not participate in facilitating (buy and/or exchange) product related to virtual currencies, or products related or referencing to the performance of virtual currency.”

Thankfully, the notice does allow for the offending stocks to be sold or moved but no new purchases or transfers into the existing holding account will be allowed.

Shocking Lack of Clarity

One of the most concerning elements regarding this situation is the vague parameters that HSBC bank are using to measure acceptable versus unacceptable holdings.

Their key indicators for non-viable products are:

• Any product related to Bitcoin, Ethereum and other digital currencies.
• Products that relate to or reference the performance of virtual currencies.
• HSBC will not facilitate the buying or exchanging of virtual currency.

Not only does this decision completely nullify their statement that they are striving to be an “agile global bank with a digital-first mindset”, but it raises red flags around which investments might suddenly fall foul of their new policy.

 First, They Came for MicroStrategy

Tweeting about this surprise notice from HSBC bank, user @Camadamus shared the email below:

HSBC specifically mention that his investment account is holding stock of MicroStrategy, and erroneously refers to it as a “virtual currency product”.

This is objectively untrue as MicroStrategy is an independent publicly traded business intelligence company. What they have however done is opt to hold 100% of their “cash” assets in Bitcoin. Investing in, and holding one’s cash reserves in, virtual rather than fiat currency, does not in any way shape or form make the business a virtual currency business.

HSBC’s new internal definition of “virtual currency business” begins to put a number of corporations at risk of being cut from their portfolio including Tesla who recently invested $1.5 billion in BTC and Jack Dorsey’s Square Inc which invested 5% of its treasury in the same.

Camadamus reached out to MicroStrategy CEO, Michael Saylor, asking for his input:

“You may want to ask your legal team if what HSBC Canada is doing here is legal. It sure does not sound like it is. They won’t allow us to buy MicroStrategy.”

With a growing demand for virtual currency investment opportunities, it will be interesting to see if this goes to court and which companies stand by HSBC and which stand by MicroStrategy, as it will set a precedent for the growth of crypto-investing for years to come.