Investors should focus on blockchain, the “core technology” behind crypto and its potential capabilities in the future, according to Hougan.

The “original sin” behind crypto is that it was considered a currency in the first place, he maintained. “The comparison should be to Microsoft and SalesForce,” Hougan said, “not to the dollar and the yen.”

Crypto compared with early internet
“The investing case for crypto is a lot like investing in the internet in the late 1990s,” according to Hougan. “No one knew what was coming. Social media had not been invented. Crypto is like early stage tech investing - very exciting.”

Crypto is not more risky “than any other asset class,” asserted Annemarie Tierney, founder and principle at Liquid Advisors. Nor is there a lack of information, according to Tierney: “There are lots of ways to learn about the asset class and risk.”

Although critics thought crypto would “blow up,” it is now “mainstream,” she said, adding that crypto has been “pretty impressive as an asset class in less than ten years.”

By contrast, Gensler has compared the thousands of cryptocurrencies with the wildcat banking era in the mid-19th century before federal bank regulation.
 

No investor protection
What’s more, Gensler pointed out in a recent interview with New York magazine, that investors who open an account on a crypto exchange or lending platform don’t actually own anything.

“You just have a relationship with that exchange, where you’re a counterparty,” he explained. “It’s a little bit like if you have a Starbucks wallet on your phone. You don’t actually have the dollars or the coffee, you have a creditor relationship with Starbucks. Here you’re just a creditor of that crypto exchange. They may or may not even have the crypto.”

Investors in crypto are not currently protected, and crypto exchanges should register with the government, Gensler argued. Registration would address a host of issues associated with crypto, he maintained, including investor protection, market manipulation, fraud, money laundering and tax compliance.

According to Tierney, SEC regulation of crypto would be “doing a disservice to the US investment market.”

Regulation may be contentious, but crypto’s popularity, volatility and speculative nature are undisputed.

Crypto is a global asset class valued at over $2 trillion, Gensler noted. And there are more combined crypto accounts than accounts at Charles Schwab, Hougan pointed out.

Digital gold and ETFs
Crypto is often compared with gold, a scarce physical store of value that has limited commercial uses. Bitcoin is a scarce digital ledger with no underlying utility - and “might not exist tomorrow,” Gensler said. “It’s a highly speculative asset class.”

As such, crypto is “an extremely volatile asset,” Tierney admitted, and “not a great asset class for everybody.”

With that in mind, Tyrone Ross, CEO of Onramp Invest, urged advisors at the Morningstar Conference to prioritize educating clients about crypto to determine whether the investment made sense for them.

“The best investment case is to come to crypto through the lens of where the client finds comfort,” Ross said. “What is bitcoin like? One analogy may be digital gold. Another may be digital oil.”

The investment “game changer” for crypto would be a bitcoin ETF, according to Hougan. “ETFs plug seamlessly into the way advisors work,” Hougan said. “So many people are on the sidelines because there are no crypto ETFs. It would open up the wealth advisory market.”