Can I invest in cryptocurrency within my ISA?

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. You can invest in cryptocurrency within your ISA, but only indirectly. An ISA, such as Fidelity’s, normally offers access to investments that are quoted on the stock market, such as shares, investment trusts and exchange-traded funds (ETFs), as well as non-quoted funds – unit trusts or open-ended investment companies – and, in some cases, bonds. There is no provision for holding cryptocurrencies such as bitcoin directly.  

• Read: Bitcoin: 7 questions answered 
• Stocks and Shares ISA: Be invested in making the most of your money

There are several ways to own crypto indirectly, or at least to have exposure to the cryptocurrency arena, but not all are available through your ISA. The most obvious way would be to buy an ETF that invests in bitcoin or other digital coins but, while such ETFs do exist, the City regulator does not allow them to be sold to private savers. Anyone who does want exposure to cryptocurrencies via an ISA must therefore take a different path.  

• Explore: Exchange-traded funds (ETFs)

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 has just changed its name from 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 538,200 bitcoins worth $49bn, according to its website. The company’s current market value is $92.9bn. 

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, 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 Mastercard and IBM. 

Another new 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 most 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. 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.

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