(Bloomberg) – Institutional investors take note: Regardless of whether you are a true believer with sharp eyes or a skeptical refusal, the risks of cryptocurrencies could constantly “creep” into your portfolio, according to MSCI Inc.
According to an analysis by MSCI, at least 52 companies with a market capitalization of $ 7.1 trillion have some exposure in cryptocurrencies. They range from all-in-players like Coinbase Inc. to Bitcoin balance “hodlers” like Tesla Inc. and MicroStrategy Inc. to those involved in crypto market services like JPMorgan Chase & Co.
The growing importance of the volatile digital asset class poses a number of challenges for investors and companies as they attempt to assess the environmental, social and governance risks associated with it, the report said. According to the MSCI, this includes questions about everything from greenhouse gas emissions from mining coins to a lack of accounting standards for crypto to questions about transparency in the operation of the networks.
“Really simple questions get really tricky here,” said Harlan Tufford, who heads MSCI’s North American corporate governance research, on a podcast about the report. “Who in the company knows, for example, the access key for accessing your private anonymous wallet, which stores a billion dollars in Bitcoin? And how do you monitor that? ”
To make matters worse, members of company boards seem to lack crypto expertise. MSCI searched the biographies of approximately 6,500 board members and found only 79 people in 64 companies that contained references to cryptocurrency or blockchain, while 1,114 contained references to cybersecurity. A search for “risk management” yielded 5,155 results.
In other words, company boards really could use more laser eyes given their exposure.
“People with advanced cryptocurrency-specific skills and experience will likely be rare – at least within the traditional executive recruitment pipelines,” the report concluded. “This could be an opportunity to expand areas of board diversity such as the age of directors.”