Important information: the value of investments and the income from them can go down as well as up, so you may get back less than you invest.
Q. Can I invest in cryptocurrency within my ISA?
A. There's been some excitement recently around holding bitcoin in ISA funds. Here we explain what's changed and outline existing ways to invest in cryptocurrency.
Earlier this month the rules changed to allow private investors to put ISA money in funds that invest into a cryptocurrency such as bitcoin. Cryptocurrency funds bought and sold on the stock market like ETFs (exchange traded funds) have been allowed by the City regulator to be sold to institutions for some time. What has changed is that private investors can now invest in these funds too and hold them in an ISA or pension. These are actually a type of fund called 'exchange traded notes', a cousin of ETFs, and are 100% backed by the cryptocurrency itself, making them a faithful way to deliver bitcoin returns to investors.
However, there are several other ways to own crypto more indirectly, or at least to have exposure to the cryptocurrency arena, via funds or shares held within your ISA.
One option is to buy shares in a company whose value is linked to that of cryptocurrency. An example is the American business Strategy, which was previously known as MicroStrategy. While it is described as ‘a provider of enterprise-ready analytics, mobile, and security software platforms’, it also says on its website: ‘Strategy is the world’s first and largest bitcoin treasury company. We are a publicly traded company that has adopted bitcoin as our primary treasury reserve asset.’ In essence, it uses the money generated by the other parts of its business, as well as funds raised by selling shares and by borrowing, to buy bitcoin. At the time of writing, the company has 640,250 bitcoins worth $73.3bn, according to its website. The company’s current market value is $87.5bn.
Another large crypto-related company whose shares you can hold in an ISA is Coinbase, the cryptocurrency broker.
A further option is to invest in the cryptocurrency sector more generally. There are, for instance, funds that hold a range of crypto-related investments. This way you are diversifying your assets, which should mean less volatility and less risk of severe loss.
One such fund is the iShares Blockchain Technology UCITS ETF, which is an exchange-traded fund (ETF) bought and sold on the stock market. A look at its ‘Portfolio’ page on the Fidelity website shows that the fund has holdings in companies such as Mara Holdings, which uses surplus energy to power data centres, and CleanSpark, a bitcoin ‘miner’ or creator, as well as Coinbase. The fund also owns stakes in businesses less directly tied to the fortunes of crypto and the underlying ‘blockchain’ technology, such as the chip maker Advanced Micro Devices (AMD).
Another recent addition to the Fidelity Personal Investing platform is the VanEck Crypto and Blockchain Innovators ETF. This ETF invests in a concentrated portfolio of around 20 crypto-related companies and, unlike the iShares Blockchain Technology ETF, holds Strategy as one of its largest holdings.
Remember that cryptocurrencies are a relatively new invention and have yet to be used as money on an appreciable scale; instead, they have been used largely as a means of financial speculation. Unlike many conventional investments, they also generate no income. As a result, there is little objective support for their value and more reason to expect a reversal of recent price rises in tokens such as bitcoin. At the very least, volatility in their prices should be expected; we had a taste of that at the weekend when President Trump’s threat of new tariffs on China caused sharp falls in crypto prices. Regulators have warned that buyers of crypto should be prepared for the entire loss of their investment. You may therefore wish to consider making any investments in crypto-related assets only a small proportion of your portfolio.
Fidelity is exploring options to make cryptocurrency ETNs available on the Personal Investing platform. To stay up to date with our latest content and Fidelity product developments, sign up to our Pulse emails.
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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. There is no guarantee that the investment objective of any Index Tracking Sub-Fund will be achieved. The performance of the sub-fund may not match the performance of the index it tracks due to factors including, but not limited to, the investment strategy used, fees and expenses and taxes. The shares in these investment trusts are listed on the London Stock Exchange and their price is affected by supply and demand. The investment trust can gain additional exposure to the market, known as gearing, potentially increasing volatility.This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.
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