Will the Bitcoin ETP be impacted by the FCA's ban on crypto-derivatives in the UK?

Hi all,

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 we’ll be forced to sell this holding when the ban comes into place?

I only discovered this ETP today and was excited, as I’d 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 bitcoin… But now I’m wondering if this is a viable investment due to the FCA news

I found another article that spoke about this ETP in the context of the ban, but it wasn’t entirely clear whether it actually is impacted, and if so then how.

I also understand that the ban applies to derivatives, and one could argue this ETF is not a derivative since it’s backed by actual BTC in safe custody… But I’m not an expert so would be great to get your views on this

Thanks all for your help

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$BTCE was actually added on the platform after the ban was announced, so I’m sure the T212 team did their due diligence.

But you’re right - $BTCE is structured as an ETC (it’s collateralised with actual Bitcoin instead of using some return/swap agreement with a counterparty). This is what helps them circumvent the ban.

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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 it’s almost too good to be true, I mentioned this here… I guess it’s ok for now but who knows what will happen in the future.

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Thanks both for your responses.

I’ve 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 can’t 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.

Here’s what ETC Group said in their email:

Because of the FCA rule changes, UK retail investors won’t 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.
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Oh - thanks for the heads up! Good to know.

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?

Wouldn’t mind not being able to buy more providing the product won’t be held back too much by the lack of U.K. trade and will continue to track bitcoin price trends.

Thanks in advance

I don’t think the lack of UK trading can impact the price of the ETP itself as it’s 100% backed by real bitcoin, so by nature it should track it perfectly (anyone please correct me if I’m wrong here)

Link to the product:
https://www.hanetf.com/product/8/fund/btcetc-bitcoin-exchange-traded-crypto-btce

I’m also torn as holding it in an ISA is clearly more beneficial… 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 it’s just a lot of stress as I’d 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 that’s 100% backed by a real asset is stupid and will force people onto exchanges which are riskier…

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 should’ve 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.

Don’t know if I’m 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.

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Sorry to keep on with this one…
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

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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. :clown_face:

Hmmm … what about the investors outside UK? :thinking:

Interesting, number of us holding this filtered for past 30days:

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Don’t think bitcoin is real, is it? Probably why it’s not permissible.

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In the policy PS20/10: Prohibiting the sale to retail clients of investment products that reference cryptoassets | FCA
they specify as ETN (exchange traded notes).
Is there a difference between ETP and ETN?
or ETP’s also banned?

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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 “here is our understanding of how things stand”. That suggests that they weren’t 100% sure themselves, so have there been any updates? Like you, I’m 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?

So ET is Exchange Traded.

The P is for Products of which you have:

ETF Funds
ETN Notes

So the ETN is an ETP.

Edit: Here’s wiki

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OK, but is the ETP an ETN, an ETF or something else (e.g. a CEF, ETC, ETI, etc.)?

Can anybody explain why BTCE was considered eligible for inclusion in an ISA, yet it seems to have been banned shortly afterwards?

i dont think its being banned - i think the understanding of derivatives is wrong.