Vanguard Will Now Allow Crypto ETFs on Its Platform

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(Bloomberg) -- Vanguard Group, the world’s second-largest asset manager, has decided to allow ETFs and mutual funds that primarily hold cryptocurrencies to be traded on its platform, reversing a longstanding position.

Starting on Tuesday, Vanguard will allow ETFs and mutual funds that primarily hold select cryptocurrencies, including Bitcoin, Ether, XRP, and Solana, to be eligible for trading on its platform. It’s a compromise that belies the firm’s long-standing view that digital assets are too volatile and speculative for serious portfolios and comes despite a more than $1 trillion drawdown in crypto market value since early October.

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Persistent demand — retail and institutional — has spurred Vanguard’s about-face. Since their January 2024 debut, spot Bitcoin ETFs have amassed billions in assets. Even after outflows and a decline in Bitcoin’s price, Vanguard’s biggest rival, BlackRock, has about $70 billion in its IBIT ETF alone, down from roughly $100 billion just two months ago.

Vanguard’s shift, which follows a late-September report that the firm was weighing the move, opens access to 8 million self-directed brokerage customers to regulated crypto wrappers.

Even with recent price corrections, crypto-linked ETFs remain one of the fastest-growing segments in the history of the US fund industry. Crypto bulls will see Vanguard’s capitulation as psychological fuel: the latest sign that traditional finance can no longer resist the gravitational pull of digital assets.

“Cryptocurrency ETFs and mutual funds have been tested through periods of market volatility, performing as designed while maintaining liquidity,” said Andrew Kadjeski, head of brokerage and investments at Vanguard. “The administrative processes to service these types of funds have matured; and investor preferences continue to evolve.”

The change comes more than a year after Salim Ramji, a former BlackRock executive and longtime blockchain advocate, took over as Vanguard’s chief executive officer. The firm said it will support most crypto ETFs and mutual funds that meet regulatory standards, mirroring its treatment of other non-core asset classes like gold.

Still, the firm won’t be creating its own digital inventory anytime soon and funds tied to memecoins, as described by the Securities and Exchange Commission, will remain excluded.

“While Vanguard has no plans to launch its own crypto products, we serve millions of investors that have diverse needs and risk profiles, and we aim to provide a brokerage trading platform that gives our brokerage clients the ability to invest in products they choose,” Kadjeski said.

(Corrects number of brokerage customers on Vanguard’s platform in fourth paragraph.)

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