UBS believes that bitcoin is a speculative investment and is not advising its clients to invest in the digital currency, the bank's chairman told CNBC Tuesday.

Speaking at the World Economic Forum in Davos, UBS Chairman Axel Weber said the bank makes a clear distinction between institutional and retail clients when it comes to investing in bitcoin.

"We do make that distinction, there's institutional clients and if they want to invest in (bitcoin) — they are grown-ups, I mean they know what they are doing, they have the capability of judging this risk — and if they ask us to help them access, to enter these markets, we need to look at that differently than retail clients," Weber told CNBC.

"Retail clients, who don't fully understand these products should be protected from going into these products, because if there is a retail client affected in the future, the question will be again who was the bank that sold them these products and then banks will be blamed again for what has happened," Weber said in reference to some banks being criticized for selling complicated financial products prior to the global financial crisis without explaining them in full.

Weber warned that "clearly with bitcoin, this is a speculative investment; I don't call it currency and retail clients do not have the risk bearing capacity nor the knowledge to invest in that."

Though UBS allows institutional clients to trade bitcoin, Weber made it clear that "this is not an investment we would advise."