Britain’s largest online trading platform, Hargreaves Lansdown, is to allow its customers to invest in bitcoin, the alternative digital currency.
The broker, which administers £70bn of investors’ money, will give its 876,000 customers access to a fund that tracks the price of bitcoin, the best-known of a new breed of alternative currencies.
The fund, offered by a Swedish company, XBT Provider, is structured as an “exchange-traded note” (ETN). This is a fund listed on the stock exchange, meaning it can be bought and sold like a share.
XBT buys complicated “synthetic” certificates, listed in US dollars, that aim to track the price of bitcoin. The ETN itself is denominated in Swedish krona. British investors are therefore exposed to two levels of currency risk.
The Swedish firm warned: “The value of and any amount payable under the certificates will be strongly affected by the performance of bitcoin and the US dollar/krona exchange rate. As such an investment in the certificates is likely to be highly volatile and thus risky.”
As with any unconventional assets, investors should be extremely wary and think carefully before placing money in such assets.
Danny Cox of Hargreaves Lansdown said: “We have seen a handful of clients asking for the ETN, so it’s not purely driven by a provider wanting to be listed [on the Hargreaves platform]. We are making it available to self-select investors in the same way we offer access to around 3,000 other exchange-traded funds, notes and commodities.”
Hargreaves customers can hold the bitcoin investment in their self-invested personal pension (Sipp) or a normal broking account.
Mr Cox added that Hargreaves already allowed investors to access the Bitcoin Investment Trust. The $389m fund is run by Grayscale Investments, which specialises in “crypto-currencies”.
“By adding self-service, online dealing, the team at Hargreaves Lansdown is providing UK investors with professional and quick access to bitcoin in the UK and greater Europe,” said Ryan Radloff, XBT’s head of investor relations.
Crypto-currencies came to notice following the launch of bitcoin by a developer under the pseudonym of Satoshi Nakamoto in 2009. Online currencies are beyond the control of the world’s central banks and allow anonymous transactions. They operate using a digital ledger of transactions known as a “blockchain”.
The price of bitcoin has surged since the start of the year. Its price in dollar terms has more than doubled from less than $900 to more than $2,400 today. Currently one bitcoin equals £1,902, €2,145 or $2,422, according to CryptoCompare.com.
The currency also hit the headlines last month when the hackers behind the WannaCry cyber attack that took down parts of the NHS IT system demanded ransom payments in bitcoin. The currency has long been linked to the online underworld.