Friday, October 23, 2020

How to put Bitcoin in your ISA or in your SIPP

With the recent run-up in Bitcoin price, a number a people in the UK have been wondering how to get some Bitcoin exposure inside their pension or their ISA. 

While in many jurisdictions such as the US or Canada, it's possible to get exposure to Bitcoin in tax wrappers such as pension funds, the UK financial conduct authority, in its great wisdom, decided that it was way too risky for the average Joe. 

The way most people get Bitcoin exposure in tax wrappers is by buying exchange listed trackers such as the Grayscale Bitcoin Trust (GBTC) in the US, the Bitcoin Fund (QBTC.U) in Canada or XBT Provider and BTCetc in Europe. While it was possible to buy such trackers into SIPPs in the past, the FCA made it illegal in early 2020. And the situation will actually get even worse next year since sale of such trackers will be altogether forbidden to all private investors in the UK. 

While it's still possible to get Bitcoin exposure directly by buying the cryptocurrency on exchanges such as Coinbase, Kraken or Gemini (and soon Paypal), some people would rather do that into a tax friendly container such as an ISA or a SIPP. And in such containers you cannot buy cryptocurrencies nor any of the available listed trackers. 

But a recent development that we talked about in our previous post is providing an alternative way to achieve that goal in a stealth way. Indeed, as more and more listed companies put Bitcoin on their balance sheet, and as the price of Bitcoin increases, those companies in effect are becoming virtual Bitcoin ETFs, allowing shareholders to get indirect exposure to Bitcoin if they buy the stock. 

If you buy today shares of Microstrategy, you actually get a 28% Bitcoin exposure as well. And if you buy shares of Galaxy Digital Holdings you get a whopping 69% exposure. You can find the growing list of such companies there.  As their number increases in the next few months, so will your options. We can also imagine that some companies will eventually get an exposure above 100% if they start leveraging their balance sheet by borrowing fiat against their Bitcoins holdings (this is what Hut 8 Mining has started to do already). 

Until the regulator changes the rules again, those shares are available today in most ISAs and SIPPs (such as the ones from Saxo Bank and Interactive Investor). One needs to be careful however because some providers such as AJ Bell only provide access to a subset of the foreign equity markets for cost savings reasons (typically only those shares that settle through Crest).

So if you believe, like more and more investors, that a portion of your savings should be in a hard asset such as Bitcoin, you now have plenty of options, even in those places where the regulator would want you to avoid doing it.  And if you're still on the fence, the best place to start is by following the short journey of Microstrategy CEO Michael Saylor at hope.com!

No comments:

Post a Comment