FCA Proposes Lifting Ban on Crypto ETNs for Retail Investors

The United Kingdom’s Financial Conduct Authority (FCA) has proposed lifting its ban on offering cryptocurrency exchange-traded notes (ETNs) to retail investors. This move, if implemented, would allow individual consumers to access crypto ETNs, provided they are listed on an FCA-recognized investment exchange. The FCA's decision is part of a broader effort to support the growth and competitiveness of the UK's crypto industry. The regulator has launched a consultation on this proposal, which, if successful, could see retail investors gaining access to these products as early as September. The consultation period will allow for public input and consideration of the potential risks and benefits associated with this change.

The FCA's ban on retail access to cryptoasset derivatives will remain in place, indicating a cautious approach to high-risk investments. The regulator will continue to monitor market developments and consider its approach to such investments. The FCA's executive director of payments and digital assets, David Geale, emphasized the regulator's commitment to supporting the growth of the UK's crypto industry. He noted that lifting the ban would allow individuals to make informed choices about high-risk investments, acknowledging the potential for significant financial loss.

The FCA's decision to lift the ban on cETNs comes after a period of significant pressure from industry stakeholders. The regulator had initially banned the sale of crypto derivatives and ETNs to retail investors in January 2021, citing the high risk associated with these products. However, the FCA's stance has shifted, reflecting a growing acceptance of crypto assets within the financial industry. The regulator's decision to allow retail access to cETNs is seen as a step towards providing a safer and more regulated environment for retail investors to engage with cryptocurrencies.

The FCA's proposal has been welcomed by industry experts, who see it as a positive development for the UK's crypto market. The move is fully aligned with the UK’s ambition to position itself as a sophisticated jurisdiction in the crypto space. It will not only unlock exposure to crypto assets for retail investors but stands as a signal that the UK is open to crypto. The FCA is currently working on a new iteration of its crypto regulatory framework. In late May, the regulator requested public feedback on proposed regulations for stablecoins and cryptocurrency custody. The ongoing efforts also follow a recent revelation by UK Chancellor of the Exchequer of plans for a “comprehensive regulatory regime” aimed at making the country a leader in the crypto sector.