Bitcoin Ban: Merrill Lynch Prevents Clients, Advisors From Trading Cryptocurrency

Wealth management firm Merrill Lynch has blocked all of its clients and financial advisers who manage money for clients from trading Bitcoin over fears of instability relating to the cryptocurrency, the Wall Street Journal reported.

The ban will keep the firm’s nearly 17,000 financial advisers from suggesting Bitcoin-related investments and advises against client requests to invest and trade in the cryptocurrency, which has a history of fluctuating wildly despite producing massive gains over the past year.

Included in the ban is the Grayscale Investment Trust Bitcoin fund that is invested exclusively in Bitcoin and Bitcoin futures, which launched just weeks ago on CME, the world's largest futures exchange. Merrill Lynch reportedly implemented its “no Bitcoin” policy on Dec. 8, just days before the launch of Bitcoin futures.

According to an internal memo reviewed by the Wall Street Journal, the decision to block investments in Bitcoin was driven primarily by “concerns pertaining to suitability and eligibility standards.”

Merrill Lynch’s ban doesn’t necessarily spell trouble for Bitcoin, but it does reveal the cryptocurrency’s ongoing challenge to be treated as legitimate. Funds like the Grayscale Bitcoin Investment Trust were intended to allow traditional investors to achieve exposure to Bitcoin, but now those traditional investors are blocking the ability to pursue such options.

Merrill Lynch isn’t the only firm to prevent Bitcoin trading, either. The United States-based brokerage arm of financial services company UBS has also moved to prevent trading of Bitcoin-related products, and JPMorgan Chase and Citigroup both chose not to allow clients to access Bitcoin futures.

It’s easy to see why firms would want to move to keep clients from investing heavily in cryptocurrencies like Bitcoin—and equally easy to see why those clients would want to put their money in the digital tokens.

Over the course of 2017, Bitcoin jumped from being valued at less than $1,000 at the start of the year to just short of $20,000 by year’s end. There are few other ways to produce such a massive return in such a short period of time. However, the price has undergone wild swings , gaining and losing as much as 50 percent of its value in a matter of hours—and there’s no guarantee the bottom won’t fall out on the cryptocurrency at some point.

According to the Wall Street Journal, advisers at Merrill Lynch have mixed feelings regarding the firm’s ban on Bitcoin. Some view it as a missed opportunity and note that clients are very interested in Bitcoin. Others think the cryptocurrency carries too much risk and would rather not be involved in it.

Regardless of Merrill Lynch’s decision, there clear hunger for all things cryptocurrency on Wall Street. A number of companies have managed to make their stock price jump just by mentioning the use of blockchain, which is commonly associated with cryptocurrencies.

Last month, Long Island Iced Tea Corporation saw its stock price skyrocket after it announced that it would change its name to Long Blockchain Corporation—a move that saw its stock skyrocket by more than 225 percent. A small financial technology company called LongFin also managed to have its stock surge by 2,600 percent after announcing it was getting into the business of cryptocurrencies.