‘Regulation doesn’t automatically make something a sound investment’

As cryptocurrency begins its road to being regulated, Isabel Baxter explores what this will mean for the financial advice profession…

Back in November last year, the Financial Conduct Authority (FCA) started to share its approach to regulating cryptocurrency and set out a roadmap.

The most recent development was the regulator’s May 2025 consultation on stablecoin issuance and crypto asset custody, with final rules expected in 2026. This came after the Treasury published a draft regulatory proposal for running crypto assets in April.

With that in mind, should financial advisers be educating themselves more on cryptocurrency, and will they consider the option more for clients if it becomes regulated?

The Bitcoin IFA founder Daniel Parkinson is a qualified financial adviser himself but now helps regulated financial advisers and wealth managers understand Bitcoin through a professional lens.

“Most UK advisers know Bitcoin is here to stay, but between regulatory grey zones, tax confusion, and compliance fears, it can feel easier to avoid the conversation altogether,” he tells PA.

‘More people in the UK own cryptocurrency than take professional advice’

Parkinson notes that more people in the UK own cryptocurrency than take professional advice.

“The demographics of [Bitcoin] ownership are skewing younger – these are the accumulators coming up behind today’s retirees,” he says. “They’ll become your future high-net-worth clients, and your competitors are already diversifying to capture them.”

Paramount Wealth Management director and Chartered financial planner Keith Brooks tells PA that he does get asked about cryptocurrency quite regularly, particularly during periods when prices are rising quickly and it dominates the headlines.

“In many cases, the first exposure clients have to crypto is through conversations with friends or family, especially younger generations who are more comfortable with digital assets,” he says. “The demand is there, but it’s generally reactive, inconsistent, and rarely aligned with a client’s broader financial plan or risk profile.”

For Gratitude Financial Planning financial adviser Freddie Winter, he has never had a client specifically ask for advice on investing in crypto.

“It is getting more frequent that clients ask about it or already hold some, but I’d say that’s still less than 10% of new enquiries – and I speak with quite a lot of younger clients too, not just retirees,” he shares with PA. “It’s still unregulated and comes with a ton of risk from all angles for an adviser putting their name to a recommendation.”

Conversely, Nova Wealth founding partner Joseph McLean says that crypto is featuring in client conversations “more and more”.

“Especially with younger clients that are part of what we would call the ‘future wealth’ bracket,” he says. “Having said that, we have clients in their 60s and 70s who hold crypto. The demand is most commonly limited to a relatively small proportion of overall wealth.

“But here again there are exceptions – we have some clients holding millions of pounds in Bitcoin and other digital currencies.”

Advisers urged to have base level cryptocurrency knowledge

Until the FCA takes anything forward, in the UK, crypto is still largely unregulated, so Brooks noted that most advisers will naturally be reluctant to discuss it in detail, “let alone recommend it”.

That said, the adviser believes it is important that advisers maintain at least a base level of cryptocurrency knowledge.

“Crypto has become so widely talked about that clients expect us to be able to explain how it works, where the risks lie, and why it may or may not be suitable for them,” Brooks says.

He highlights that being open to the conversation does not mean endorsing crypto as an investment.

“It’s about being able to provide context, separate fact from hype, and ultimately help clients make better-informed decisions,” Brooks says. “Sometimes that simply means explaining why it doesn’t fit into their financial plan or risk profile, which in itself can be hugely valuable.”

Sharing a similar view, Winter says that advisers need to be more open to learning about crypto, especially considering Bitcoin’s market performance.

“It is clear it’s here to stay,” he says. “Bitcoin now has an enormous market cap (nearly as big as Google), it continues to appreciate (albeit in a volatile way) and it is slowly becoming established and recognised by the world’s big financial institutions and regulators.”

Winter suggests that cryptocurrency should stay in clients’ own ‘play-pot’ / share dealing account where clients can “have fun speculating but it isn’t part of the advice and isn’t going to impact clients’ financial plans negatively”.

One of the main reasons why IFAs may steer away from advising on cryptocurrency is its volatility.

“Some might argue that’s been the price worth paying for the enormous value growth in the last decade. But equally, I think we are still a fair way off crypto becoming a core part of any ‘balanced’ portfolio,” McLean says.

“Not only do clients need to be content with the high potential volatility, typically it’s an expensive asset to trade and hold (relative to large cap stocks) – most exchanges still charge fairly high fees – and the regulation isn’t there yet (although it’s come a long way) in terms of parity with ‘traditional’ investments like global equities.”

Finfluencers and ‘get rich quick’ schemes

The FCA has made it clear that it wants to crack down on finfluencers who may be causing harm, many of which are involved in cryptocurrency and ‘get rich quick’ schemes. Combatting fraud is also high on the agenda for the watchdog.

In a recent case, Raymondip Bedi and Patrick Mavanga were sentenced to a combined 12 years in prison for their roles in a £1.5m crypto fraud following a prosecution brought by the regulator.

Brooks says that this has created a stigma around crypto as being more of a “speculative punt” than a credible investment.

“Which makes it harder for advisers to even bring balanced education into the conversation,” he notes.

McLean also notes that this early phase of cryptocurrency has been “tarnished reputationally” by these schemes, but said that as it matures, becomes better regulated and better understood, we could see that reputation “improve significantly”.

“Time will tell.”

Will we see an uptick in cryptocurrency advice as it becomes regulated?

Brooks believes that “proper regulation is long overdue” when it comes to cryptocurrency.

“Clearer rules around promotions, custody, and market access should bring greater consumer protection and hopefully improve standards across the board,” he says. “I’ve no doubt that some advisers will see regulation as an opportunity to engage with a younger, tech-focused audience who are already curious about digital assets.”

When it comes to whether more advisers will consider it as an investment option for clients, Brooks notes that cryptocurrency is “such a broad term that it’s impossible to give a single answer”.

“There’s a world of difference between a digital asset with a large established market like Bitcoin, and the thousands of speculative meme coins that exist,” he explains. “To talk about crypto as if it were one, uniform asset class oversimplifies the risks and opportunities.”

The planner also warned that regulation “doesn’t automatically make something a ‘sound’ investment”.

“Volatility, valuation uncertainty, and the lack of long-term track records remain key issues,” Brooks says. “For advisers, the role is more about helping clients understand where – if at all – crypto might sit within a diversified portfolio, and making sure it aligns with their capacity for loss, rather than treating it as a mainstream investment option.”

Cryptocurrency to be a regular feature in multi-asset funds?

In the future, Winter says he can see cryptocurrency as a regular feature in multi-asset funds or client portfolios.

“Whether this be as a diversifier – much like gold over the past century – or as a modern day emergency fund/currency hedge, particularly for very high net worth clients,” he says.

Although Winter highlights that even when the regulation comes through, he struggles to see it as “true growth asset” when it comes to investing.

“Like gold it doesn’t have any intrinsic value. No profit. No Income,” he notes. “You’re just hoping someone (or a lot of people) will want to pay more than you paid for it in the future. For me this isn’t a reliable way to invest clients’ money.”

“I’m therefore not itching to put Bitcoin or other crypto into clients’ portfolios any time soon, and maybe never. It doesn’t have a very long track record in the grand scheme of things and who knows how it is going to behave going forward.”

McLean highlights that advising on cryptocurrency will depend on the firm’s investment philosophy or house views.

“For those advisers used to recommending individual stocks, commodities or traditional fiat currencies for example, it might be an easier transition,” he says. “For others, advice may only extend to how much exposure you should accept to the asset-class as a whole.”

“Either way, it can’t be ignored – much in the same way an adviser might not advise a client on which property to purchase, that property would nonetheless form a part of their financial planning.”

The regulator has recognised cryptocurrency’s popularity and wants to have it under its watchful eye. Time will tell if it becomes a core part of the financial advice process.

Source: PA