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HSBC bans customers from buying Bitcoin-backer MicroStrategy shares
- arthurcolle 5y agoI know memes are frowned upon on HN but I couldn't resist here: https://i.imgflip.com/55eaft.jpg https://i.imgflip.com/55eaft.jpg
- robjan 5y agoThat's old news and not applicable anymore
- space2026 5y agoHSBC is just playing save here as MicroStrategy is itself kind of a Bitcoin ETF with 81% of its balance sheet in the cryptocurrency [1] https://bitcointreasuries.org/ https://bitcointreasuries.org/
- Someone1234 5y ago> “HSBC has no appetite for direct exposure to virtual currencies and limited appetite to facilitate products or securities that derive their value from VCs (virtual currencies),” HSBC said in a statement. But you wouldn't be? This is a product literally called "InvestDirect" where private individuals are buying stocks and assuming all the risk. If you don't want to offer margin on virtual currency products, more power to you, that is your risk. But if customers are buying with cash, it seems pretty suspect for the bank to claim that is increasing the bank's risk exposure. Honestly it wouldn't be the worst idea to have a "Net Neutrality" for brokers.
- exit 5y ago> Honestly it wouldn't be the worst idea to have a "Net Neutrality" for brokers. and/or we could tokenize securities onto permissionless and decentralised ledgers and stop feeding the intermediaries note that a ledger with transaction validation rules which enforce KYC can still be permissionless and decentralised bitcoin isn't "permissioned" just because you need a valid signature to spend an output
- niceairport 5y agoMaybe they have issues with people taking on a margin that they cannot afford? Cryptocurrencies being as volatile as they are shorting them on a margin can result in high losses that HSBC prefers not to be involved with? Just a guess.
- ptero 5y agoNot impossible, but IMO highly unlikely: stocks, especially smaller ones can be way more volatile than any currency with over 1T market value. And you can still buy those on margin.
- niceairport 5y agoThat's true. Maybe something to do with regulations then? HSBC is already being accused of being involved with money laundering quite a lot. Also, what other coins except BTC have market cap >1T?
- ptero 5y agoI suspect regulation (or fear of impending one) is the likely culprit; but again, not sure. Re: size -- I was including regular fiat currencies, not just digitals.
- perl4ever 5y ago>you can still buy those on margin That is absolutely not the case in a categorical sense. Brokers can and do apply different margin requirements on a stock by stock or customer by customer basis. There's nothing out of the ordinary about a security not being marginable or having increased requirements due to risk assessment. For example, here is a list of stocks at one broker with particular margin requirements, and it says it "changes frequently": https://invest.ameritrade.com/cgi-bin/apps/u/MarginReq https://invest.ameritrade.com/cgi-bin/apps/u/MarginReq Given that there are hundreds starting with "A", I'd assume the entire list is in the thousands, of securities that have individual margin requirements. I think in fact the ticker GBTC which is a trust that owns Bitcoin isn't marginable.
- elliekelly 5y agoKnowing absolutely nothing about this particular situation I’d be willing to bet this decision is a lingering side effect of HSBC’s most recent (and seemingly perpetual) AML issues. I suspect they’re trying to appear squeaky clean and an action like this is quick, easy to implement operationally, and looks good to regulators who are uneasy about cryptocurrency’s reputation for facilitating criminal activity online.
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- BelenusMordred 5y agoI don't see how kyc/aml applies to this particular stock over every single other ticker they will happily sell you? There's no difference, they aren't selling cryptocurrency here.
- londons_explore 5y agoBuying or shorting this stock to the tune of billions of dollars might be a good way for a drug dealer to mitigate the currency fluctuation risk to his big pile of illicit bitcoins stashed under his bed.
- Uw7yTcf36gTc 5y agoEasier and cheaper to do with Bitcoin futures
- AnthonyMouse 5y ago> I don't see how kyc/aml applies to this particular stock over every single other ticker they will happily sell you? There's no difference, they aren't selling cryptocurrency here. It's the equivalent of security theater. Do something conspicuous that they can spin as having done something about the problem. That serves their purpose regardless of whether it actually does any good or makes any sense. On top of that, cryptocurrency kind of competes with banks, so they have an excuse to cause trouble for the competition.
- petre 5y agoThey just have appetite for drug and weapons money laundring. https://www.theguardian.com/business/2012/dec/14/hsbc-money-laundering-fine-management https://www.theguardian.com/business/2012/dec/14/hsbc-money-...
- robjan 5y agoThis is one of the reasons that HSBC are so strict now.
- the_local_host 5y agoIf they're concerned about exposure, they could simply set the margin trading leverage below 1 (e.g. offering 0.1x leverage so that customers have to post $10 in margin to buy $1 in MicroStrategy shares).
- wutXthree 5y agoAre you saying someone would need to post more than the value of the share?
- the_local_host 5y ago> Are you saying someone would need to post more than the value of the share? Yes, as an alternative to not allowing the trade. If the bank considers something highly risky, it makes sense to protect themselves and the customer by making sure they've got some money locked up outside of the trade (a bankrupt customer is no longer a customer, after all). It would basically cap the percentage of net worth that they could put at risk, where they'd need to have $10 set aside for every $1 in the risky position.
- sokoloff 5y agoThere’s no need for a bank to nanny their customers. If you don’t want to book the trade, don’t book it. Going beyond that in some tortured logic to ensure they tie up extra money (possibly incurring unjustified margin calls on other positions) has almost exclusively downsides for HSBC.
- riffraff 5y agothis seems to clearly fall under "facilitate" tho.
- revel 5y agoThey already have a version of Net Neutrality for brokers: reg NMS. HSBC are well within their rights to refuse to accept bad orders. HSBC are exposed to specific regulatory risk not shared by US banks. Having a ton of customers go bust because a regulatory change nuked some meme stocks seems undesirable to me. If you don't like it you can always find another broker.
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- kolinko 5y ago> If you don't like it you can find another broker It's like saying that net neutrality exists, because "if you don't like throttling you can find another ISP"
- jamespo 5y agoThere are a lot more brokers available than ISPs
- wutXthree 5y agoWhy would an exchange allow a "meme stock"?
- goatinaboat 5y agoMicroStrategy has been around since the 80s hasn't it? I thought they made business intelligence software. They are not some weird company that appeared overnight out of nowhere.
- powerapple 5y agoHSBC does a lot money laundry for rich people around the world, and now it is worrying about risks? I don't think so. But it is a telling for potential direction of US government is taking for bitcoin. HSBC is doing many things to please the US government, this may be one of them.
- JumpCrisscross 5y ago> if customers are buying with cash, it seems pretty suspect for the bank to claim that is increasing the bank's risk exposure Cash trades still expose brokers to volatility due to settlement. This policy is likely one part regulatory theatre and one part customer selection. Customers buying MicroStrategy stock are unlikely to be lucrative customers for the banking products HSBC hocks.
- kasey_junk 5y agoYeah if they were worried about settlement risk they could just not release funds/shares until they settle. But that’s probably harder to implement than a blanket ban and they have nothing to gain by catering to the meme shares crowd.
- JumpCrisscross 5y ago> if they were worried about settlement risk they could just not release funds/shares until they settle This doesn’t solve the problem of clearing collateral. That said, HSBC is a money centre bank. It isn’t worried about clearing collateral. The policy is almost certainly a filter. If you’re trading MicroStrategy, you’re probably not a fit for their banking and wealth management services.
- kasey_junk 5y agoNot to get too far in the weeds (as I agree with your point) but why wouldn’t holding the funds/shares until settlement cover the clearing? Especially given they control the order routing and risk systems involved?
- Inception 5y agoThis seems extremely shortsighted.
- gruez 5y ago>The bank said its policy towards cryptocurrencies had been in place since 2018 and is kept under review. It could not immediately say which countries the ban applied to. My guess is that it's just some middle manager blindly following directives from 2018 that haven't been updated. I can't think of any other reason why they'd ban it when everyone else is moving in the opposite direction.
- fighterpilot 5y agoThey're one of the most bureaucratic and inefficiently ran banks in existence, an absolute nightmare to deal with on every level. Not sure how they're still around, I wish they had been fined into oblivion after they were caught money laundering for narco traffickers.
- MattGaiser 5y agoTried to open a bank account with them for a promo. So. Much. Paper. And I still didn't manage to open my bank account despite filling stuff out online and visiting a branch.
- beervirus 5y agoI wonder if they let you buy GBTC, ETHE, or LTCN.
- gruez 5y agoor CME bitcoin futures
- nkurz 5y agoIs there a good up-to-date resource for understanding the current premium that MSTR has over its BTC holdings? The article says: "MicroStrategy said last week it owns around 91,579 bitcoins. Its holdings, worth around $5.5 billion according to a Reuters calculation, are equal to around 80% of its $6.8 billion market capitalisation." Naively, this would imply a fairly low premium. But among other things, this doesn't account for fact that Microstrategy took on a lot of debt to buy their bitcoins. Essentially, I'd like to see an updated and more complete analysis like this: https://old.reddit.com/r/microstrategy/comments/ltypps/sell_mstr_buy_gbtc_or_btcc/ https://old.reddit.com/r/microstrategy/comments/ltypps/sell_.... Does such a thing exist?
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- RoboTeddy 5y agohttps://twitter.com/SBF_Alameda/status/1380284657820782595 https://twitter.com/SBF_Alameda/status/1380284657820782595
- CryptoPunk 5y agoMy bet is that they are afraid of regulators fining them. The multi-billion dollar fines they received over the last few years constitutes a significant portion of their profits and has probably made them hyper-vigilant. One of the unintended consequences of the Total Information Awareness / financial mass-surveillance AML/KYC movement is banks derisking at the expense of marginalized people and industries: https://www.reddit.com/r/MakerDAO/comments/de0sys/kyc_is_absolutely_not_acceptable_for_makerdao/ https://www.reddit.com/r/MakerDAO/comments/de0sys/kyc_is_abs...
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- wmf 5y agoIt seems like it's somebody's job to decide if MicroStrategy can lever up on Bitcoin but it shouldn't be individual brokers' jobs. Banks/brokers need to be neutral infrastructure. Their responsibility for AML should be to report suspicious behavior and no more; let regulators or law enforcement enforce the laws.
- randomopining 5y agoBanks are zeroes.
- Alkim 5y agoI am with you brother. If there is an argument for bitcoin, this is it. Large banks that impose their own priorities over that of their customers.
- cercatrova 5y agoVery interesting seeing this here, I see this on Twitter mainly from a specific account.
- randomopining 5y agoHeh. The one that just changed their name recently? I still have a few ways of reasoning that they're wrong, but I feel like they're always right. I've been following since like 2015.
- cercatrova 5y agoIndeed. I wonder how it'll go for the next few years. Feels like 2013, 2017 these days.
- randomopining 5y agoYeah it's crazy. They've become so bullish on it the past 6 months, it's ridiculous. Are you?
- cercatrova 5y agoNot sure. I feel like I've seen this situation play out before. Parabolic spikes of activity then drops.
- jbverschoor 5y agoIs that even allowed by law/regulators?
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- cwkoss 5y agoI'm sure they'll also ban customers from buying Tesla... /s
- rawtxapp 5y agoNext up, they'll have to ban Tesla, Square, Coinbase, Riot, etc. Where will they draw the line? Pretty much the whole market has exposure to Bitcoin through SP500->Tesla at this point.
- mullingitover 5y agoTesla has a market cap of 673.80B at the moment. Their BTC holdings are barely a rounding error.
- mike_d 5y agoWhich is a problem in itself. Tesla with a 2% market share in the US, is valued more than Toyota, Volkswagen, Daimler, General Motors, and BMW combined (40% of the domestic market). Toyota makes about $2,500 profit for every car sold. Tesla would need to make $50,000 per unit sold on average, or basically 100% profit on a Model 3, to justify the market cap.
- rawtxapp 5y agoPersonally, I'm with you, I just don't see how Tesla's valuation is justified. Their cars have QC issues and they have very formidable competitors. If I had to buy a car, I'd pick the Porsche Taycan over any Tesla any time of the day (except maybe the Roadster, but it's not out yet). That said, I have a few friends who bought it's shares and their rationale is that it's a "clean energy play", far bigger than cars and that their brand is going to be as valuable as Apple. Only time will tell I guess, everyone can put their money where their mouth is and shorting Tesla has been a pretty bad proposition so far.
- xony 5y agoworried about terr funding , money laundering ?
- xiphias2 5y agoIt’s a great signal for potential buyers to just leave HSBC and find a better broker.
- listenallyall 5y ago"Better" like Robinhood, which, instead of firmly stating a position in advance, changes its mind day-by-day about which stocks its customers can buy or sell? And which was pretty damn close to going bankrupt earlier this year because it didn't have a sufficient risk management policy?
- xiphias2 5y agoInteractive Brokers and Saxo are good options for example in UK. I think RobinHood is US only, but US has more professional brokers as well.
- listenallyall 5y agoI guess you and I have different opinions on what makes a "better" broker. I'm in favor of clearly-defined policies that anticipate certain events, which are communicated to all customers far in advance, so customers can make an informed decision whether or not to patronize that particular company. You seem to be happy with firms like IBKR which might decide, mid-day, at the peak of volatility, to lock out its customers from trading certain securities, without any advance notice or warning. https://www.investopedia.com/robinhood-latest-broker-to-restrict-trading-of-gamestop-and-others-5100879 https://www.investopedia.com/robinhood-latest-broker-to-rest...
- xiphias2 5y agoI think it wasn't them who decided but the clearing house. Right now HSBC itself did the banning. If you don't like the situation, you can just buy the underlying asset (Bitcoin) and hold it in a cold wallet (I'm doing that).
- CynicusRex 5y agoThat makes it sounds as if it's a bad thing. Instead read it like “HSBC bans customers from buying pyramid-scheme-backer MicroStrategy shares”.
- kolinko 5y agoIt's not HSBC's role to decide which things are pyramid schemes. SEC is for that, and they have made it very clear that neither Bitcoin or Ethereum are one.
- jariel 5y ago"It's not HSBC's role to decide which things are pyramid schemes." Yes it is. It's the job of banks to advise on these things. It is a peculiar position they've taken, they've gone further than I think they'd have to, there's probably some reason for it that won't be very obvious on a non-financial forum.
- rmtech 5y agoIn related news, the bank will soon be renamed to HFSP Bank, in recognition of the crucial role it plays in reducing the risk of its clients making too much money.
- rmtech 5y agoYou can get a nice hoodie with the new HFSP logo here: https://www.koined.store/collections/out-and-about/products/hfsp-bank-zip-hhoodie https://www.koined.store/collections/out-and-about/products/...
- quattrofan 5y agoReally you couldn't make it up considering the criminal activities this bank has been involved in most recently in Latin America
- jdmg94 5y agoIsn’t HSBC the bank that has been caught money laundering for criminals over and over again?
- rchaud 5y ago> MicroStrategy said last week it owns around 91,579 bitcoins. Its holdings, worth around $5.5 billion according to a Reuters calculation, are equal to around 80% of its $6.8 billion market capitalisation. Why would a software company buy this volume of this highly volatile crypto and put it on its balance sheet? Wouldn't the board object?