As lots of you probably know, the FCA has decided to ban the sale of crypto-derivatives and ETNs to UK retail investors from 2021.
Will the Bitcoin ETP (BTCE) be impacted by this ban? And if so, does that mean weāll be forced to sell this holding when the ban comes into place?
I only discovered this ETP today and was excited, as Iād much rather pay the 2% annual management fee and hold this in an ISA rather than get slapped with 20% capital gains tax (or more) when selling real bitcoinā¦ But now Iām wondering if this is a viable investment due to the FCA news
I also understand that the ban applies to derivatives, and one could argue this ETF is not a derivative since itās backed by actual BTC in safe custodyā¦ But Iām not an expert so would be great to get your views on this
$BTCE was actually added on the platform after the ban was announced, so Iām sure the T212 team did their due diligence.
But youāre right - $BTCE is structured as an ETC (itās collateralised with actual Bitcoin instead of using some return/swap agreement with a counterparty). This is what helps them circumvent the ban.
this was my first question too when this got added, on the official website it says ISA is ok but I am suspicious of it as itās almost too good to be true, I mentioned this hereā¦ I guess itās ok for now but who knows what will happen in the future.
Iāve actually checked directly with the fund managers (ETC Group) and the distributors (HanETF) and unfortunately both have said this ETP will be impacted by the ban.
This is quite disappointing, however we can still buy into the ETP until 6 Jan 2021 and after that can still continue to hold and sell when we like, but we just canāt buy more.
Could still be worth buying in now if just planning to hold a few units long term, especially as capital gains tax may be going up soon on real crypto held outside an ISA.
Hereās what ETC Group said in their email:
Because of the FCA rule changes, UK retail investors wonāt be able to buy products like BTCE from 6 January 2020. Here is our understanding of how things stand:
Retail investors should still be able to buy products now but some UK brokers jumped the gun and have restricted access to retail investors in anticipation of the new rules coming into effect;
Retail investors can keep their positions as long as they want and they can, of course, sell their positions whenever they want now and in the future;
BTCE is very liquid on exchange and this ban is for the UK retail only so we feel the impact on the product long-term will definitely be felt but not significant given how it is passported within so many countries in Europe and traded from around the world.
Thank you for looking into this - real shame! Although as has been mentioned it did seem a bit too good to be true
Kind of torn now as would like to load up before the ban and holding long term, but struggling to quantify how this may affect future performance of BTCE specifically. Any thoughts?
Wouldnāt mind not being able to buy more providing the product wonāt be held back too much by the lack of U.K. trade and will continue to track bitcoin price trends.
I donāt think the lack of UK trading can impact the price of the ETP itself as itās 100% backed by real bitcoin, so by nature it should track it perfectly (anyone please correct me if Iām wrong here)
Iām also torn as holding it in an ISA is clearly more beneficialā¦ But then say there is a crash in 2021 and I want to sell and buy back in later, I would need to buy back in with real crypto, which would then be liable for capital gains.
(I realize this scenario is still more tax-efficient than holding real crypto the whole time - but itās just a lot of stress as Iād be faced with a dilemma between staying in and maintaining the 0% tax, or selling and rebuying but facing CGT moving forward)
In any case this is a really backward move from the FCA. I can understand banning crypto CFDs and other derivatives, but banning a product thatās 100% backed by a real asset is stupid and will force people onto exchanges which are riskierā¦
Thanks for this. Have read through the material on their website and you are indeed correct, this will continue to track bitcoin price regardless of U.K. exclusion - guess I shouldāve done some more research!
I do think this therefore represents a pretty fantastic opportunity to hold within an ISA - will have to accept pretty massive volatility, though that should hopefully calm down somewhat with institutional buying.
Donāt know if Iām stating the obvious but if you were to choose to go down the route of holding significant amount of real crypto as an investment, it would definitely be worth looking into a hardware wallet e.g. Trezor.
Sorry to keep on with this oneā¦
Just wondered if anyone has confirmed whether Trading212 will support this functionality - the ability for us to continue to hold the shares, monitor the price and sell as we please just without the buy option?
If not, would I be best to contact them in app about this?
Cheers for the update. This is frustrating as I set up a pie to AutoInvest into this over the next decade. Will just have to load up by end of year with a decent amount and then continue to buy real BTC on Coinbase Pro at al.
FCA are so backwards, CFD, leverage and gambling is okay but oh no Bitcoin backed my math, consensus and code is a no go.
I came on to ask exactly the same question. I had a quick look on Investopedia and I did get the impression that they are different.
The email from ETC Group said āhere is our understanding of how things standā. That suggests that they werenāt 100% sure themselves, so have there been any updates? Like you, Iām hoping that there is enough of a distinction between ETNs and ETPs that BTCE can avoid the axe!
Does anybody know if there is any scope to reverse the general FCA ban? Are there any organisations that are actively disputing it, perhaps legally?
Can we get an official statement from @Team212 on BTCE please?
