Why “protecting” retail crypto investors has the opposite effect

Bloomberg reported this week that the Irish Central Bank is “highly unlikely” to allow retail investment funds to hold crypto assets. Their thinking is clear and, on the face of it, seems rational and bona fide. However, prohibiting retail investors to gain exposure to crypto assets via regulated investment funds only pushes them to find their own way to invest.

A simple tutorial on YouTube will teach you how to open accounts on crypto exchanges, regulated or unregulated. It will also teach you how to set up your Metamask wallet which you can then use to trade on decentralised exchanges or connect to NFT marketplaces. These retail investors are now more exposed than ever and are making investments which can go very wrong for a number of reasons: rug pulls, money grabs, hacks, lack of liquidity, loss of private keys and backup phrases. 

Arguably, there is a stronger case to allow regulated retail investment funds to hold crypto assets so that retail investors can get exposure to a booming asset class, and very much a piece of the future, whilst being afforded as much protection as possible.

In Gibraltar we have several crypto funds which are regulated as Experienced Investor Funds. They are extremely well managed both in respect of investment decisions but also with regards to cyber security and safekeeping of assets. It is time to rethink the retail investor approach so that we can democratise the asset management industry and make it a level playing field where retail investors can invest side by side with institutions and wealthy individuals.

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