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How to add Bitcoin to your Isa and profit tax-free

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How to add Bitcoin to your Isa and profit tax-free - INA FASSBENDER/AFP
How to add Bitcoin to your Isa and profit tax-free - INA FASSBENDER/AFP

Advocates of cryptocurrencies argue that over the long term, prices will go higher due to a limited supply of tokens and increase in demand as more and more companies and investors move to embrace digital money.

Bitcoin is the original and still the most important cryptocurrency, but it cannot be owned directly in traditional tax-efficient accounts such as Isa and pensions. Gains made outside of such accounts are liable for capital gains tax which could eat up 10-20pc of the profits after a £12,300 allowance.

There are, however, a number of ways investors can track the value of Bitcoin and other cryptocurrencies via Isas and pensions. Telegraph Money takes you through the best options.

Argo Blockchain

Bitcoin is “mined” by computers solving complex calculations which get gradually harder over time. There are currently 18.5m Bitcoins in circulation and the final ones are expected to be mined in 2140, meaning that there is still plenty of time for companies involved in the process to make a lot of money.

Argo Blockchain, listed on the London Stock Exchange, owns 16,000 computers working on these calculations. In 2020, it mined 2,465 Bitcoins. The share price has over 280pc this year alone.

KR1

KR1 is a £190m cryptocurrency investment firm that owns 35 different digital coins, including well known ones Bitcoin and Ethereum, as well as newer options such as Polkadot, Cosmos and Dfinity. Owning KR1 shares is a way of owning a spread of different cryptocurrencies inside an Isa or Sipp.

Its share price has risen from 25p to 160p this year, a six-fold increase.

Elwood Blockchain Global Equity ETF

This ETF, which has the stock market ticker BCHS, from American fund manager Invesco tracks a basket of companies deemed to have the “potential to participate in the blockchain ecosystem”.

Blockchain is the technology which underpins the Bitcoin network and allows transactions to take place.

This means the ETF owns companies directly involved in blockchain technology, as well as businesses with large cryptocurrency assets, such as MicroStrategy, an American software business which recently bought billions of dollars worth of Bitcoin.

It also owns big technology companies, such as Taiwan Semiconductor Manufacturing.

The £760m ETF charges 0.65pc and has risen 20pc in value in the past year.

Coinbase shares

British investors can buy shares in Coinbase, one the world's biggest cryptocurrency exchanges. It offers a wide range of tokens, including Bitcoin, Dogecoin and Ethereum.

A higher Bitcoin price means more trading, which is good for Coinbase. It charges a flat fee for trades and a percentage fee for conversions between coins.

Read more: 'My Bitcoin investment multiplied by ten in just two years - there's only one catch’

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