How to invest in anything through your ISA – except bitcoin

Edmund Greaves

ETF technology has transformed the face of modern investing, making a dizzying array of investments available to anyone in the UK with an ISA, but a bitcoin ETF is still missing. Why?

ETFs have been a gamechanger for investing on a global scale.

Not only do they offer immediate access to bundles of mainstream investments, but they have unlocked a world of niche thematic and other asset classes to anyone interested in owning them, be they ‘institutional’ (think big pension funds or banks) or private investors like you or I.

In the past multitudes of gatekeepers stood in front of such products, commanding fees and generally making the experience more convoluted and expensive.

But now, anyone can log into a mainstream investment platform, open an ISA, and buy gold, uranium, pork futures, liquor trackers, or basically any other kind of investment we think might be a good ‘un.

This is because ETFs are listed on mainstream stock markets. This means when you have an investment ISA on an investment platform that offers those stock markets, for the most part you have unfettered access to this array of products.

LISTEN: Edmund Greaves talks bitcoin and Argentina with Trevor Schrock

But in 2024 there is one glaring omission from this list for British investors – bitcoin.

Unlike almost any other asset which can be held within a tax-sheltered ISA account, bitcoin cannot be owned in a way that doesn’t attract some sort of potential tax implication. The main one of these being capital gains tax (CGT) which is payable when you realise a gain on an investment.

With CGT allowance now shockingly low (having been squeezed to death by income-hungry Chancellors) this is now a significant problem, especially considering bitcoin’s recent dizzying performance.

So why can’t we hold a bitcoin ETF in an ISA?

The ETFs have arrived

The truth is that in other parts of the world, bitcoin is most certainly available in an ETF format. This opens access to millions of investors who wouldn’t otherwise go to the trouble to enter the ecosystem of the cryptoasset.

Investors in the US were given access to such products this year for the first time, and – as Tom Bailey, head of ETF research at Han ETF, my guest on the latest Mouthy Money podcast noted – the EU has also had bitcoin ETFs (or ETCs as he points out they’re actually called) for some time.

So why then no luck for UK investors? Put simply, the UK’s financial watchdog, the FCA, has banned it.

The FCA says it believes there’s too much risk associated with cryptoasset investments, therefore retail investors should not be able to own them. It reconfirmed this view recently.

But the FCA is cutting off its nose to spite its face here. Instead of encouraging investors to hold these assets in ISA accounts on regulated platforms, it has instead decided that we should all just try and find riskier ways to hold the asset.

It is true to say that you can now hold cryptoassets such as bitcoin on major platforms such as Revolut, but this still doesn’t confer tax sheltering because of the lack of an ISA.

It also isn’t going to be the place where everyone ends up – some people are going to end up in offshore places getting scammed, ripped off and otherwise exposed to unnecessary risk that the regulator has imposed through ignorance and sheepishness.

Bitcoin is now simply too big to ignore. It’s high time the FCA reconsiders its ban on bitcoin ETFs for private investors in the UK. To promote sensible investment, protect from unnecessary risk, and to confer equivalent tax benefits of other major asset classes.

Listen to the full podcast episode where host Edmund Greaves digs into the world of ETFs with Tom Bailey, head of ETF research at Han ETF. Tom and Ed discuss everything from gold to energy, uranium, bitcoin and the Royal Mint in the world of ETFs.

All investing carries risk. This article is intended for information purposes only, and should not be construed as financial advice. Always research investments before making decisions and seek professional advice if in doubt.