Poll: Crypto asset storage 🏦


(Christopher) #1

What would be your preferred method of storing your crypto assets when using Freetrade?

  • Regulated custodial arrangement
  • Private wallet
  • Say what now?! What’s the difference?
  • I’ll stick to stocks thank you very much! This crypto business isn’t for me

0 voters

Let the community know why you’ve chosen a particular answer in the discussion below!


#2

If the regulated custodial agreement gave access to the private keys of the wallet, I would be happy with that.


(Calum McWhir) #3

I get the sentiment, and this is the driver behind multi-sig arrangements (more here). It’s a sort of best of both worlds. Without this, there’s no way to assign liability in the case of theft. If both you and the institution hold the same key, you become a security risk that they are exposed to and this is uninsurable.


(James) #4

I think you should hold off until a consensus emerges among the big financial institutions on how to handle cryptocurrency storage. I’d also like to see a consultation with UK regulators and for Freetrade to listen to their recommendations (even if that includes avoiding crypto entirely).


#5

I chose regulated custodial arrangement because: 1) I have private wallet providers elsewhere that I’m happy with (it’d be a nice bonus if Freetrade had them though) 2) I think an ETF tracker fund with a basket of the top underlying cryptos would be a unique offering for the everyday investor. Rebalancing would take care of itself whereas with multiple private wallets one has to actively rebalance manually.


#6

The best option would be too cooperate with someone like Coinbase which now has a custodian solution https://custody.coinbase.com/ . They are regulated in 33 countries for buying and selling are the biggest fiat onramp and also have a UK LTD. They also invest in crypto related companies through Coinbase Ventures.

I’m a crypto investor that now also invests in technology related startups (one being Freetrade).


(Calum McWhir) #7

I agree that institutional grade custody is a pre-requisite, but specifically in terms of Coinbase their lack of GBP deposits and withdrawals suggests to me they’re having problems with banking partnerships in the UK. Here’s hoping they get it sorted soon, as they announced they would back in February.


#8

Coinbase announced GBP support Buying bitcoin, ethereum and other cryptocurrencies with British pounds (GBP)


(Calum McWhir) #9

giphy


#10

For active trading, a live wallet (e.g. a custody wallet at an exchange, a Lightning node, etc) is the most convenient option. For storage, if you don’t have sole possession of the private keys, you don’t possess the coins.


(Calum McWhir) #11

This is the ideal approach for those willing to engage in security with time and effort. But for the masses (and institutions) regulated, insured and accountable custodians offer a decent trade off between indirect ownership and being able to sleep at night.

And on this very point, news just in :coffee:


#12

https://www.bloomberg.com/news/articles/2018-08-15/lovelorn-u-s-bitcoin-etf-fans-may-find-satisfaction-in-sweden

This is interesting…


(Danny Jeremiah) #13

Yep, I’ve held that in my Hargreaves Lansdown SIPP for just over a year now. It’s a bit pricey (something like 2.5% annual charge) but it’s done very well for me!

I’m also interested to get Freetrade’s take on Bakkt which was announced by ICE (owner of the NYSE) last week. It’s a next-day future with ‘physical’ delivery but I think most interestingly, includes warehousing which will take care of the custody.

Supposedly this will be available to any broker plugged in to ICE’s systems. Could this be the engine for Freetrade to offer Crypto? If so I could see it being one of the best offerings on the UK market.


(Alex Sherwood) #14

If anyone’s been wondering why there hasn’t been more excitement about this ETN & how it’s actually different from an ETF, like me, this is a pretty good explainer -


(Danny Jeremiah) #15

I don’t see it explained in that article.

To all intents an purposes it is the same as an ETF. Coinshares buy and sell ‘physical’ bitcoin precisely in line with the units of the fund bought and sold. Therefore the NAV of the fund is always equal to the shares in issue.

The bitcoin is then held on cold storage by XAPO.

In fact, of all the bitcoin ETF applications out there at the moment only one (VanEck-Solidx) is physically replicated in this way, the rest are all synthetic based on futures.

I think the reason it’s not getting much love this week is that ETNs are not widespread and not very well understood in the USA, but in reality this is just a branding/marketing problem in this case. The product is good, expensive (2.5% a year) but good and the only way to get bitcoin exposure in a tax-efficient way in the UK.


(Alex Sherwood) #16

My bad, I posted the link to completely the wrong story there, I’ve fixed that now.

I’m not sure about that - given how much pent up demand there is among institutional investors, I’d have expected this news to have spread via word of mouth & the press once it was publicised if this was what investors really needed. This sort of explanation (from the right story :wink:) seems more likely in my opinion -

“This is not as big as [it would be] if it was SEC regulated. An ETF in the U.S. — that was SEC registered — would have a much bigger effect. But, if there is something that is driving new money into the price of Bitcoin, then you would imagine it would raise it up.”


#17

This is what @alexs was meant to post I presume.
https://cointelegraph.com/news/etn-vs-etf-which-is-the-investors-dream


(Calum McWhir) #18

I think the tax advantage of the SIPP means it represents very good value, and fair play to HL for allowing investors to make their own decisions even if it does mean they are facilitating the holding of a wildly volatile asset for what should be considered retirement income. A rare example of common sense prevailing. Even in a GIA you could justify the expense for the convenience - we’ve spoken before about how difficult it is to retain your own private keys and trust yourself not to mess it up!

Certainly food for thought, and the wider variety of adoption methods out there the more legitimacy it inevitably gains. I’m very interested to see how it plays out because I personally see the existing ETF / ETN infrastructure as appropriate for most passive investment needs (in the same way it is for gold). It then becomes a question of what do customers actually want - to speculate or spend? It’s not clear we’ve arrived at the latter yet.

This is correct and I cite the perceived lack of enthusiasm to be on account of it not being a domestic American product, as @alexs has pointed out. There is technically a difference in the risk profile in that a fund’s assets are indirectly owned by the investors, whereas a note’s investors have a debt obligation against the issuer. As such, the latter attracts counterparty risk because of the possibility of default. As you say, in this case it is immaterial given the physical replication, which is auditable.

Interesting in this regard is the case of GBTC (an American bitcoin tracker reserved for accredited investors and institutions). Historically it has always traded at a massive premium due to it being the only US issuer of an instrument that legitimately tracks bitcoin in lieu of anything exchange-traded or more adoption friendly. Its premium has fallen markedly in the last week or so and I expect it will continue to do so now that XBT Provider is being marketed in the States. This is a solid indicator that the note is fit for purpose, but invariably some will wait for the SEC to green light a domestic fund.


(Alex Sherwood) #19

Interesting! I suppose institutional investors are less likely to react quickly to this news or to make their plans to use the note public so perhaps we’ll see some announcements in the future - which might then cause the market to react..


(Alex Sherwood) #20

A post was merged into an existing topic: Buying bitcoin, ethereum and other cryptocurrencies with British pounds (GBP)