Merrill Lynch bars trading of bitcoin fund, futures

By Lisa Beilfuss Markets The Wall Street Journal

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Merrill Lynch, a unit of Bank of America (BAC) has blocked clients and financial advisers who trade on their behalf from buying bitcoin, citing concerns over the cryptocurrency’s investment suitability.

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The ban applies to all accounts and precludes the firm's roughly 17,000 advisers not only from pitching bitcoin-related investments but also from executing client requests to trade the Grayscale Investment Trust bitcoin fund, according to a person familiar with the matter.  The ban extends an existing policy barring access to newly launched bitcoin futures.

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Existing positions in the bitcoin fund can be maintained in brokerage accounts, but not in fee-based advisory accounts, the person said.  The brokerage arm of Bank of America Corp. put the policy into place Dec. 8, right before the launch of the first U.S. bitcoin futures, the person said.

“The decision to close GBTC to new purchases is driven by concerns pertaining to suitability and eligibility standards of this product,” according to an internal memo reviewed by The Wall Street Journal, referring to the Grayscale's fund’s trading symbol.

A spokeswoman for Merrill Lynch confirmed the decision, which applies firmwide and includes self-directed accounts.

Grayscale’s Bitcoin Investment Trust is an open-ended trust that is invested exclusively in bitcoin and derives its value from the price of bitcoin, according to Grayscale Investments LLC. It was created for investors seeking exposure to bitcoin through a traditional investment vehicle, the firm said, and it trades over the counter.  

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Merrill Lynch’s decision to ban trading in the bitcoin investment trust is the latest sign of Wall Street’s wariness when it comes to digital currencies. The U.S. brokerage arm of UBS Group AG already bars its advisers from trading bitcoin-related products, according to a person familiar with the policy. Several other firms -- including JPMorgan Chase & Co., Citigroup Inc. and Royal Bank of Canada -- told clients that they wouldn’t offer them access to the first bitcoin futures market when it went live Dec. 10.

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Financial industry executives have expressed skepticism about the cryptocurrency's long-term viability. JPMorgan Chief Executive James Dimon has called bitcoin a fraud, while Berkshire Hathaway Inc.’s Warren Buffett questioned whether governments would let it keep growing unabated.

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Bitcoin started 2017 at about $970 and rose to nearly $20,000 by December, a gain of about 2,000%. That was punctuated by five selloffs of at least 30%, including one in December that drove prices down 45% before they recovered to $14,292, according to CoinDesk. Bitcoin was up 1,375% on the year. 

In recent trading Wednesday, bitcoin was just under $15,000.

At Merrill, advisers have mixed views on the move. Some advisers have bemoaned missed trading opportunities. Advisers say clients are calling about investing in bitcoin, demand that some advisers want to satisfy.

But others think it’s in clients’ best interest to avoid the emerging market surrounding cryptocurrencies. “I think it’s a very good idea,” said one Merrill adviser of the brokerage’s decision. The firm “made an assessment that there’s too much risk.” In buying a country’s currency, the broker said, “you buy that country” based on its underlying economy and monetary supply. “When you buy bitcoin, you just buy bitcoin.”