FCA UK Towards OK for Crypto ETNs for Retail, Stop on ETFs
The UK FCA proposes to allow crypto ETNs for retail investors, but maintains the ban on spot ETFs.
On 6 June, the UK's Financial Conduct Authority (FCA) unveiled a significant proposal to end the long-standing ban that prevented retail investors from trading exchange-traded notes (ETNs) linked to cryptocurrencies.
The initiative is part of a broader regulatory package aimed at increasing market competitiveness and simplifying access for financial firms.
Retail investors would be able to access crypto ETNs thanks to the proposed changes, as these debt instruments are designed to track the price movements of digital assets. ETNs would have to be listed on a recognised investment exchange and comply with UK financial promotion rules.
The FCA confirmed that strong protective measures, including risk disclosures and restrictions on promotional incentives, will remain in place, in line with existing regulations on direct sales of digital assets.
Charlie Morris, ByteTree executive, announced the news on X stating: "I am thrilled with the announcement that the FCA has lifted the ban on UK retail investors trading crypto ETFs. ByteTree, in partnership with 21Shares, introduced the BOLD (Bitcoin and Gold) ETF in 2022. This development represents a significant moment for both assets on their path to mainstream. It is very exciting to see UK investors now involved in BOLD."
The FCA's current proposal excludes spot ETFs on cryptocurrencies, despite their popularity in the US. ETNs are unsecured debt securities that do not confer direct ownership of the underlying assets, whereas spot ETFs directly own cryptocurrencies such as Bitcoin.
The FCA maintains its position against spot ETFs, which are still under regulatory and legislative consideration in the UK. The introduction of these instruments would require new regulations on custody and fund structures, as well as possible legislative changes.
Regulatory Route Reversal
This consultation represents a change of heart by the FCA from its 2021 decision, which banned retail investor access to crypto ETNs and derivatives. The ban on retail crypto derivatives remains in place, but the proposal highlights a new strategy by the authority to manage high-risk investments while offering greater decision-making freedom to consumers.
David Geale, the FCA's executive director, described the regulatory change as an attempt to "rebalance" the risk framework, allowing retail investors to assess whether such investments are compatible with their risk profile.
In March 2024, the FCA had already approved the creation of segments for ETNs crypto aimed at professional investors, and the current proposal builds on that initiative. Now the aim is to extend access to retail customers as well, provided that trading takes place on FCA-recognised venues, such as the London Stock Exchange, and that investor protection rules are met.
The UK Treasury's strategic goal of turning the UK into a global hub for digital innovation receives further support from this announcement. The public consultation will remain open until 31 July.
Approval of the amendment could transform retail investors' approach to the crypto market in a regulated environment, creating a balance between market expansion and consumer protections. The UK's regulatory framework would thus move closer to the European Union's model, which already allows broader access to crypto ETNs by retail investors.
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On 6 June, the UK's Financial Conduct Authority (FCA) unveiled a significant proposal to end the long-standing ban that prevented retail investors from trading exchange-traded notes (ETNs) linked to cryptocurrencies.
The initiative is part of a broader regulatory package aimed at increasing market competitiveness and simplifying access for financial firms.
Retail investors would be able to access crypto ETNs thanks to the proposed changes, as these debt instruments are designed to track the price movements of digital assets. ETNs would have to be listed on a recognised investment exchange and comply with UK financial promotion rules.
The FCA confirmed that strong protective measures, including risk disclosures and restrictions on promotional incentives, will remain in place, in line with existing regulations on direct sales of digital assets.
Charlie Morris, ByteTree executive, announced the news on X stating:
"I am thrilled with the announcement that the FCA has lifted the ban on UK retail investors trading crypto ETFs. ByteTree, in partnership with 21Shares, introduced the BOLD (Bitcoin and Gold) ETF in 2022. This development represents a significant moment for both assets on their path to mainstream. It is very exciting to see UK investors now involved in BOLD."
The FCA's current proposal excludes spot ETFs on cryptocurrencies, despite their popularity in the US. ETNs are unsecured debt securities that do not confer direct ownership of the underlying assets, whereas spot ETFs directly own cryptocurrencies such as Bitcoin.
The FCA maintains its position against spot ETFs, which are still under regulatory and legislative consideration in the UK. The introduction of these instruments would require new regulations on custody and fund structures, as well as possible legislative changes.
Regulatory Route Reversal
This consultation represents a change of heart by the FCA from its 2021 decision, which banned retail investor access to crypto ETNs and derivatives. The ban on retail crypto derivatives remains in place, but the proposal highlights a new strategy by the authority to manage high-risk investments while offering greater decision-making freedom to consumers.
David Geale, the FCA's executive director, described the regulatory change as an attempt to "rebalance" the risk framework, allowing retail investors to assess whether such investments are compatible with their risk profile.
In March 2024, the FCA had already approved the creation of segments for ETNs crypto aimed at professional investors, and the current proposal builds on that initiative. Now the aim is to extend access to retail customers as well, provided that trading takes place on FCA-recognised venues, such as the London Stock Exchange, and that investor protection rules are met.
The UK Treasury's strategic goal of turning the UK into a global hub for digital innovation receives further support from this announcement. The public consultation will remain open until 31 July.
Approval of the amendment could transform retail investors' approach to the crypto market in a regulated environment, creating a balance between market expansion and consumer protections. The UK's regulatory framework would thus move closer to the European Union's model, which already allows broader access to crypto ETNs by retail investors.
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