The UK’s Financial Conduct Authority (FCA) recently proposed to lift a pre-existing ban on ETNs based on crypto. This would allow retail investors to trade in these products, which are exclusive to institutional clients.
Still, this is only a proposal, and it will require around a month of consultation before it can be approved.
FCA to Soften Crypto ETN Stance
The British government has been promising new crypto regulations for months now, and one of its chief regulators has been doing the same. Despite previous hostility to the industry, the FCA has been acting conciliatory to crypto, and its new proposal to legalize crypto ETNs continues the trend.
“This consultation demonstrates our commitment to supporting the growth and competitiveness of the UK’s crypto industry. We want to rebalance our approach to risk and lifting the ban would allow people to make the choice on whether such a high-risk investment is right for them, given they could lose all their money,” said David Geale, the FCA’s executive director of payments and digital finance.
Specifically, the FCA plans to allow individual investors to purchase crypto ETNs, which had previously been exclusive to institutional clients. This isn’t a full liberalization; the Authority was quite clear that retailers have no access to other crypto derivatives. Still, it will “continue to monitor market developments,” and may adjust this policy too.
This is a noticeable win for global crypto regulation, albeit one that highlights Britain’s reluctance to support the industry. The FCA approved crypto ETNs for institutional traders over a year ago, for example. Retail investors have been stuck waiting, and the wait isn’t over yet.
To be clear, the FCA hasn’t actually approved retail crypto ETNs yet. This is simply a proposal that requires approval, and it will be out for consultation until July. After this point, either the Treasury or Parliament will have the final say on implementing it. The nation is aiming to be a global crypto hub, so this policy will hopefully come to pass.
Still, it’s easy to see why the FCA’s ETN proposal could see pushback. In Q1 2025, crypto-based ETFs were the worst-performing funds in all of Britain, a distressingly recent data point. Nonetheless, the industry has been fighting hard to win new regulatory freedom over the last few months. Ideally, this proposal will become government policy, leading to future wins.