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- Crypto faces caution as HL warns investors despite the UK lifting the ban on retail crypto ETNs.
- Despite caution, HL to permit select crypto ETN trading by 2026 for speculative investors.
- The UK pushes blockchain reforms with digital gilts and a new digital markets champion.
Hargreaves Lansdown (HL), the largest retail investment platform in the UK, has cautioned against investing in crypto assets despite the regulations easing the limitations on crypto-linked investment products.
On October 8, the Financial Conduct Authority (FCA) finally rescinded a long-standing ban on crypto exchange-traded notes (ETNs), meaning that retail investors can now buy these products similarly to regulated exchange trades, tax-free within their ISAs.
Crypto Volatility Raises Concern
Crypto ETNs are fixed dollar instruments compensated by the performance of digital currencies, including Bitcoin and Ethereum. This inclusion in mainstream portfolios represents a notable step for the UK digital asset industry, which views it as a crucial progression towards establishing itself as an international crypto hub. However, HL has come out strongly against it. According to the company, Bitcoin is not a class of assets and has no features to appreciate it in growth or income portfolios.
HL highlighted the lack of value in crypto and also warned of its excessive volatility. It referred to recurrent market collapses and extreme fluctuations in prices that do not suit prolonged investors. Bitcoin has had good long-term returns but is extremely volatile and far more risky than bonds or stocks, the company added in its announcement.
In spite of their conservative approach, HL also stated that they intend to allow the trading of crypto ETNS on relevant clients by early 2026. This will accommodate the interests of the investors who may still pursue restricted speculative exposure in digital assets. The stance of the firm is different when there is increasing institutional interest in largely global markets.
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Megabanks like Morgan Stanley and JPMorgan are broadening their crypto-related offerings, and asset managers like Invesco claim that digital assets can act as greater portfolio diversifiers.
Chris Mellor, the Head of ETF Investments at Invesco, informed CNBC that Bitcoin could serve as a possible volunteer on volatility due to its very low correlation with conventional markets. Mellor added that there is still room for Bitcoin and gold.
UK Advances Digital Finance Reforms
DeVere Group CEO Nigel Green also indicated increased growth in Bitcoin to over $125,000 as a sign of a more efficient and self-sufficient market. He explained existing price changes, as productive volatility, as a result of institutional investors being more disciplined and patient.
Simultaneously, the government of the UK is developing its digital finance agenda. Economic Secretary to the Treasury Lucy Rigby has proposed the appointment of a digital markets champion to lead the financial market adoption of blockchain.
She also introduced the Dematerialization Market Action Taskforce to redematerialize paper share certificates into digital ones. These are considered part of the Wholesale Financial Markets Digital Strategy of the UK, which also features the introduction of blockchain-based sovereign debt dubbed as digital gilts as part of the DIGIT program.
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