The UK regulator FCA will allow retail investors to buy and sell crypto ETNs starting from October 8.
Only crypto ETNs listed on an FCA-approved recognized investment exchange will be available to UK retail investors.
FCA will still ban crypto derivatives for retail users but will keep reviewing its approach to these high-risk products.
The Financial Conduct Authority has lifted the ban to enable UK retail customers to access cryptocurrency exchange-traded notes. This will take effect on October 8. It follows a four-year restriction that began in January 2021. The update constitutes a major change in how the UK treats individual access to crypto-linked investment products.
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The decision follows a consultation earlier this year. It now opens up a segment of the crypto market previously restricted to professional investors. These cETNs must be listed on FCA-approved, recognized investment exchanges.
Regulatory Shift Driven by Market Maturity
Since the original ban, crypto investment products have grown in structure and transparency. The FCA cited improved understanding and broader adoption among investors. The regulator also noted that crypto ETNs have become more mainstream and less opaque.
ETNs are risky despite their availability to retail investors. The FCA has also emphasized the relevance of consumer awareness. Investors are encouraged to consider the level of risks before investing.
Crypto derivatives are still not accessible to retail investors in spite of the new rules. The FCA will continue to monitor these high-risk products, but has not proposed any timeline for lifting this restriction.
How Crypto ETNs Work
Crypto ETNs differ from ETFs. They are unsecured debt instruments issued by financial institutions. They track the price of digital assets but do not directly hold them. ETNs expose investors to crypto market performance without direct asset ownership.
These instruments do not fall under the Financial Services Compensation Scheme. This means investors cannot seek redress if issuers default. The FCA requires firms to follow financial promotion rules and consumer protection duties. This ensures investors receive accurate and fair information.
Only ETNs listed on recognized investment exchanges will be available for retail trade. This includes products backed by major cryptocurrencies like bitcoin and ether.
UK’s Approach to Crypto Regulation
The UK continues to move cautiously in expanding access to digital assets. The gradual implementation of the regulatory frameworks is part of a broader strategy. It seeks to achieve a balance between innovation and protection of the consumers as well as market stability.
Crypto ETNs for professional investors were first allowed in March 2024. Firms like 21Shares and WisdomTree launched products shortly after. The ETNs are currently traded on the London Stock Exchange. Coinbase secured a license from the FCA to provide cryptocurrency and fiat services in the UK.
Future regulations may include oversight of stablecoins, lending, staking, and custody services. The FCA plans to finalize these measures by 2026. Retail investors in the UK still cannot invest in U.S.-listed crypto ETFs directly. This restriction also applies to similar offshore products.
