Why Vanguard Isn’t Offering Crypto ETFs

By now, advisors know that 10 spot bitcoin exchange traded funds came to market earlier. That followed years of handwringing and feet dragging by the Securities and Exchange Commission (SEC), but the point is advisors now have an efficient, less burdensome avenue for providing crypto exposure to clients.

Still, the launch of spot bticoin ETFs – one of the most ballyhooed events in fund industry history – has led to some questions. Clients that have accounts with Vanguard, which is likely a large amount of any advisor’s client base, cannot access any of the new spot bitcoin ETFs via Vanguard platforms.

While Vanguard telling advisors and investors that it has no plans for a spot bitcoin ETF of its own isn’t surprising, preventing clients from accessing any of the new spot bitcoin ETFs and crypto-related products arguably is.

Naysayers might be apt to say the brokerage business should be about offering clients choice and preventing investors from accessing an entire asset class is undemocratic.

The Other Side of the Coin

Then again, it might not be surprising that Vanguard isn’t allowing clients to purchase bitcoin ETFs on its platform as cryptocurrency doesn’t jibe at all with the issuer’s DNA.

“The easy step for us would have been just to allow full access to crypto-related products,” noted Andrew Kadjeski, head of brokerage and investments at the firm. “But as a firm and a brokerage platform, we're purposely structured to meet the needs of our investor-owners, most of whom are long-term, buy-and-hold investors.”

Bitcoin’s reputation as a highly speculative is another reason why Vanguard isn’t allowing bitcoin ETFs on its platform and likely a reason why the firm sounds like Warren Buffett on gold when discussing crypto.

“This is at the root of our decision to not offer crypto products, whether our own or others. With equities, you own a share of a company that produces goods or services, and many also pay dividends,” adds Janel Jackson, Vanguard head of ETF capital markets. “With bonds, you get a stream of interest payments. Commodities are real assets that meet consumption needs, have inflation-hedging properties, and can play a role in certain portfolios. While crypto has been classified as a commodity, it's an immature asset class that has little history, no inherent economic value, no cash flow, and can create havoc within a portfolio.”

Not Popular, But Not Without Precedent

Many advisors probably know this, some clients, too: Vanguard has don’t things like this in the past. It halted access to inverse and leveraged ETFs in 2019. Two years ago, it stopped offering stocks trading over-the-counter on its brokerage platform.

As is the case with not allowing access to bitcoin ETFS, those previous moves were very “on brand” for Vanguard.

“We understand that our decision on crypto is not popular among some investors, but many know that we're being consistent with our philosophy and past practice,” concludes Jackson. “Our mission statement to give investors the best chance for investment success isn't just a saying for us. It's built into our DNA and we're staying true to our mission by making this decision.”

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