UBS Chairman Says a ‘Massive’ Bitcoin Correction Is Possible

UBS Group AG Chairman Axel Weber said the Swiss bank won’t trade Bitcoin or offer it to retail clients as increased regulation could lead to a “massive” drop in value.

"This is something where the price is really unclear," Weber said in an interview Wednesday with Bloomberg TV at the World Economic Forum in Davos, Switzerland. "We fear that in the future if these investments implode and the market corrects, then investors will be looking at who sold us this."

There’s every sign that greater oversight is on the way -- South Korea is debating a potential ban on bitcoin exchanges amid concerns over money laundering and tax evasion, while China has been at the forefront of attempting to control the technology.

The European Commission said this month it may ramp up regulation of virtual currencies because of signs of a pricing bubble. In Europe, Nordea Bank AB has banned its employees from trading Bitcoin and other cryptocurrencies.

There’s very little elasticity in the supply of Bitcoin, so every increase in demand directly results in an increase in price, the UBS chairman said. Weber called for regulators to "zoom in" on Bitcoin, which today traded at $11,076, down from a high of $18,675 on Dec. 18.

"If for one reason or another, future regulation or governments make it harder to hide transactions -- there would be a massive downward correction, then those that hold these and buy at high values will sit on losses."