In what amounts to either stunning news or an example of better late than never, Vanaguard is reportedly mulling ending its ban on cryptocurrency exchange traded funds.
Remember that after spot bitcoin ETFs came to market in the US in January 2024, Vanguard made clear it would not be issuing a competing product of its own. It won’t even allow purchases of other issuers’ spot crypto-based ETFs on its trading platform. That’s right. One of the largest asset managers in the world won’t let advisors that custody with the firm or its retail clients to access ETFs such as the iShares Bitcoin Trust (IBIT). That could change as reports surfaced last week that asset manager is considering allowing clients access to third-party crypto products.
“Vanguard has begun laying the groundwork and holding external discussions in response to strong client demand for digital assets and a shifting regulatory environment,” reports Crypto In America, citing an unidentified source with knowledge of the matter. “The source said there are currently no plans for Vanguard to launch its own products, as BlackRock has done. Instead, the firm is considering letting brokerage customers access select third-party crypto ETFs, though it remains unclear when a decision will be made or which products would be offered. ”
Vanguard’s potential change in perspective comes as the aforementioned IBIT has returned 132. 6% since inception.
Speaking of IBIT…
There’s at least one clue that Vanguard is open to softening its stance on crypto ETF access. A few months after IBIT and its brethren debuted last year, Vanguard lured Salim Ramji away from BlackRock. He’s now CEO of Vanguard and he was known to be crypto-friendly at BlackRock and instrumental in bringing IBIT to life.
“Vanguard is looking to end bitcoin ETF ban (aka bend the knee lol)," Bloomberg Senior ETF analyst Eric Balchunas said on X. "We heard chatter of this too. Smart of them imo. Bitcoin and Ethereum ETFs are hugely popular and Salim was one of IBIT's midwives so he knows. "
One of way of interpreting those remarks is that no asset manager – Vanguard or otherwise – hires a crypto-friendly executive away from a crypto-progressive rival – and then tells to executive to ignore crypto. Certainly not want when that person is coming on as CEO.
Vanguards Hand May Have Been Forced
It’s not surprising that Vanguard has dragged its heels on digital currency ETF access. After all, it didn’t introduce a junk bond ETF until earlier this month. The asset manager can also argue that its core customer -- median age for their financial advice service clients was 64 – probably isn’t interested in cryptocurrency nor should they be.
In the crypto ETF access conversation, it’s not baby boomers Vanguard needs to worry about. It’s Gen Z and millennials – many of whom are likely to fire their parents’ advisors when their folks pass on. Lack of access to specific asset classes is a valid reason to search for another advisor.
As it relates to Vanguard and its potential shift on crypto ETF access, there’s some, albeit anecdotal evidence the firm has lost business from younger clients by not allowing them to buy spot cryptocurrency ETFs. Looking at some Reddit forums where articles were posted about Vanguard perhaps altering its crypto ETF access stance, some users made clear that they closed Vanguard accounts and jumped ship to Fidelity, Robinhood, and Schwab because of Vanguard’s crypto prohibitions.
No, Reddit users aren’t representative of all investors and yes, anyone can lie on the internet. However, it’s also not a stretch to see today’s crypto-enthused clients taking their business elsewhere when a broker doesn’t give them access to the products they want. Apparently, Vanguard has learned that lesson.