Investors in cryptoassets are also unlikely to be able to access the Financial Ombudsman Service or Financial Services Compensation Scheme, irrespective of whether a firm has registration with the regulator.
The next gold?
Proponents of Bitcoin sometimes tout it as a ‘new asset’ which can fulfil the role of gold within a balanced portfolio — gold tends to perform well when geo-political uncertainty is high as it is a store of value.
Gold is viewed as a safe haven asset because there is a limited supply of it in the world and this particularly takes effect at times of high inflation. Like Bitcoin gold has no 'intrinsic value'.
But Adrian Lowcock, head of personal investing at Willis Owen, said he was unconvinced by such a comparison.
He said: “Gold has a much stronger history of protecting value, whereas Bitcoin has a short history of spikes in value. Gold is hard to value, but Bitcoin is even harder.”
Rosie Hooper, chartered financial planner at Quilter, agreed. She said: “There are many other alternative asset classes that can act as a diversifier which can be accessed much more easily and without the accompanying volatility.”
Access to Bitcoin was also an issue, according to the experts. From January 6 this year, the FCA banned the sale of crypto-derivatives to retail investors.
Mr Lowcock said this meant it was harder to invest in Bitcoin, even if advisers were willing to funnel their clients' cash into the cryptoasset.
He said: “If you can’t buy ETFs then it becomes a lot harder to access Bitcoin, other than perhaps through fund managers buying it.
“But it leaves you with a situation that advisers can only suggest a cryptoexchange and advisers are unlikely to have done the research and due diligence on this.”
In general, Mr Lowcock said advisers were right to err on the side of caution with Bitcoin, as their job was not to “jump on the next big thing” but to educate clients on the risk, volatility and limitations of such an investment.
imogen.tew@ft.com
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