Bitcoin Has No Economic Value, Says Vanguard CEO Tim Buckley

Blockchain, Investing, News, Regulation | January 24, 2018 By:

Vanguard Group CEO Tim Buckley said that his company will “never” invest in bitcoin.

The Vanguard Group is a registered investment advisor based in Malvern, Pennsylvania, with over $4.5 trillion in assets under management. It is the largest provider of mutual funds and the second-largest provider of exchange-traded funds (ETF) in the world after BlackRock’s iShares.

In an interview with CNBC, Buckley said he is not comfortable with bitcoin, as he believes that the cryptocurrency has no underlying economic value.

“You will never see a fund from Vanguard on bitcoin,” said Buckley. “We tend to stay away from assets that don’t have underlying economic value. They don’t generate earnings or cash flows.”

Bitcoin’s value skyrocketed last year. But it has fallen dramatically over the past several months in what many investors consider a bubble-like move. It is currently struggling to maintain its price above $11,000.

Even though bitcoin is highly volatile, some of Wall Street’s major players have not hesitated to launch bitcoin-related products. Chicago-based CME and CBOE recently created financial products offering exposure to bitcoin.

Vanguard, however, is not among the firms that find real value in bitcoin. Buckley said, “The bitcoin – its value is based off of scarcity – and an artificial scarcity that’s out there. It’s really tough to imagine where the long-term return comes from, other than speculation.”

He also pointed out that his company does not even have a fund backed by precious metals like gold, as they are also devoid of any underlying economic value.

Despite being quite skeptical on bitcoin, Buckley does give kudos to the growing influence of blockchain. Last month, Vanguard successfully tested a blockchain solution, developed by blockchain firm Symbiont, in a pilot program to provide a range of its index funds with up-to-date market data. The solution allows a decentralized network of investment pros to accept and post verified prices without moving through a central approval authority.