Crypto statement
From Wednesday 8 October, the Financial Conduct Authority (FCA) will allow some retail clients to trade crypto exchange traded notes (ETNs). The FCA’s ban on retail access to cryptoasset derivatives, such as futures and options, will remain in place.
At HL, we believe it’s important to give our clients choice, but to do so in a way backed up by research and expertise to ensure they are aware of risks and can make the right decisions for them. You can find our view of the risks associated with trading in cryptoassets below. We will be spending the next couple of months working on ensuring our client journeys balance client need with regulatory and risk considerations before we open crypto ETN trading on the platform.
Hargreaves Lansdown investment view
Bitcoin is the largest and most widely held cryptocurrency. While longer-term returns of Bitcoin have been positive, Bitcoin has experienced several periods of extreme losses and its value is highly volatile – much riskier than stocks or bonds. The HL investment view is that Bitcoin is not an asset class, and we do not think cryptocurrency has characteristics that mean it should be included in portfolios for growth or income and shouldn’t be relied upon to help clients meet their financial goals. Performance assumptions are not possible to analyse for crypto and, unlike other alternative asset classes, it has no intrinsic value.
Service for clients
Despite our investment view, we recognise that some clients will wish to speculate with crypto ETNs. The FCA has labelled crypto ETNs as restricted mass market investments (RMMIs). This means that they are considered high risk and are not appropriate for all retail clients, only those that have sufficient knowledge and experience. Clients will have to undertake an appropriateness assessment before being allowed to trade. In some cases, the amount that retail clients can hold in RMMIs will be restricted to 10% of their total portfolio.
HL will offer appropriate clients to trade in crypto ETNs early next year following careful development of the client journey and appropriateness assessment. We will be in touch with further information in due course.
Existing crypto holdings on HL
Prior to the FCA banning the sale of cryptoassets to retail clients in January 2020, HL offered clients the ability to trade into four crypto ETNs listed on the Stockholm Stock Exchange.
The FCA have only permitted access to crypto ETNs traded on UK based stock exchanges, such as the London Stock Exchange. The London Stock Exchange have set criteria determining which crypto ETNs they will admit for trading. These criteria include that the ETNs are physically backed by underlying cryptoassets, and that the underlying cryptoasset is Bitcoin or Ethereum.
The existing Stockholm listed crypto ETNs are ‘synthetically’ managed, meaning they do not directly own the underlying cryptoasset. The provider of these crypto ETNs (CoinShares) has launched equivalent UK listed physical crypto ETNs, which are priced in GBP. Subject to there being interest from our clients, we would look to offer these ETNs to our clients who are looking to speculate with crypto.