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Author Topic: [2017-06-02] Here's why regulators need to get serious about bitcoin  (Read 4373 times)
Eric Cartman
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June 02, 2017, 06:25:47 PM

As bitcoin's price skyrockets and popular demand increases, some of the world's largest wealth managers have started giving their clients the opportunity to invest in the digital asset.

Last week, Boston-based Fidelity facilitated investor access to the asset, and on Thursday, UK-based Hargreaves Lansdown followed suit.

Hargreaves Lansdown now gives clients the option to invest in an exchange traded note (ETN) that tracks the price of bitcoin. An ETN is an investment instrument typically listed on a major stock exchange that can be bought and sold similarly to a stock. As more well-known wealth firms give their clients access to bitcoin investment, interest in the asset by mainstream investors will undoubtedly rise. However, these firms also risk exposing consumers to the dangers associated with unresolved regulatory issues around bitcoin.

Bitcoin still exists in a regulatory gray zone, which makes it different from most other asset classes. Mainstream asset classes include securities such as stocks or bonds and tangible assets like art. The former typically have dedicated regulators — like the SEC in the US, while investment in the latter results in the ownership of a physical product. And in both cases, investors are clear about what they're acquiring. However, in most jurisdictions, bitcoin is legally neither a security nor a tangible asset, and therefore does not fall neatly under any regulator's mandate. At the same time, most mainstream investors don't have a clear idea of the asset's nature. This ambiguity, compounded by bitcoin's relative novelty, arguably means that bitcoin investments are a special case and should be treated as such by existing financial regulators. Otherwise, it will remain unclear which regulators are responsible for consumer protections regarding the asset, putting investor capital at risk.


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