Vanguard Users Threaten to Close Accounts if the Company Blocks Bitcoin ETF Purchases

The apparent decision of the second largest asset manager, Vanguard, to not allow the purchase of spot bitcoin ETFs on its platform has seemingly prompted several users towards the exit doors.

According to a Wall Street Journal report on January 11, Vanguard stated that it would not offer new spot bitcoin ETFs on its brokerage platform as they do not align with its traditional offerings.

– Spot bitcoin ETFs will not be available for purchase on the Vanguard platform. We also do not plan to offer Vanguard bitcoin ETFs or other crypto-related products – the company said in a statement to the WSJ.

– Our view is that these products do not align with our offerings focused on asset classes such as stocks, bonds, and cash, which Vanguard sees as the foundation of a well-balanced, long-term investment portfolio – it added.

Vanguard was not among the 14 issuers that applied for a spot bitcoin ETF in 2023, and some investors viewed the recent moves as a reason to shift their funds to other platforms.

One apparent Vanguard customer, Tony Spencer, claims that a spokesperson told him that Vanguard does not allow the purchase of spot bitcoin ETFs because the product ‘does not fit into Vanguard’s investment philosophy.’

Spencer also claims that Vanguard only allows investors to sell Grayscale’s leading bitcoin product, the Grayscale Bitcoin Trust, which has been converted into a spot ETF.

Coinbase’s senior engineering manager, Yuga Cohler, was among others who said he would move his Roth 401(k) savings from Vanguard to Fidelity, which launched one of the 10 spot bitcoin ETFs on January 11.

– Vanguard’s paternalistic blocking of bitcoin ETFs does not fit into my investment philosophy – Cohler added.

Bitcoin commentator Neil Jacobs stated that he is also in the process of transferring funds from Vanguard in response to the announced decision.

– A terrible business decision by Vanguard – he said.

Clients of investment firms Citi, Merrill Lynch, Edward Jones, and UBS reported that they also could not purchase spot bitcoin ETFs on those respective platforms, according to the WSJ.

Meanwhile, a spokesperson for Citi stated that the spot bitcoin ETF is already available for its institutional client base, and the company is evaluating products for its individual wealthy clients.

Merrill Lynch is reportedly waiting to see if spot bitcoin ETFs trade efficiently before deciding to offer bitcoin product purchases, according to Fox Business reporter Eleanor Terrett, who cited an unnamed source.

In the meantime, spot Bitcoin ETF trading has been available on JPMorgan’s brokerage platform. JPMorgan is an authorized participant in BlackRock’s iShares Bitcoin Trust ETF. However, the bank led by Jamie Dimon shared risk information with potential investors considering placing trade orders, according to screenshots shared by Dan McArdle, co-founder of the blockchain platform Messari.

The trading volume of spot bitcoin ETFs exceeded $4.5 billion on the first day of trading, with most flows coming from ETFs by BlackRock, Grayscale, and Fidelity.

The SEC has also approved filings 19b-4 and S-1 forms from ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Valkyrie, Bitwise, and Franklin Templeton. Hashdex has yet to receive S-1 approval.