Crypto-linked ETNs Return to UK Retail Investors After FCA U-Turn
Updated September 6
The UK marked a reversal in its stance on cryptocurrencies as the Financial Conduct Authority (FCA) announced the resumption of retail access to exchange-traded notes (ETNs) linked to digital assets like Bitcoin and Ethereum after a five-year ban imposed in 2021.
Effective October 8th, a restriction lifted by the FCA will permit UK retail investors to buy ETNs tied to cryptocurrencies, provided these products are listed on UK-regulated exchanges.
Differences and Use Case
Unlike exchange-traded funds (ETFs), which hold the underlying assets (e.g., actual Bitcoin), ETNs are unsecured debt instruments issued by financial institutions designed to track the price of an index, commodity, or cryptocurrency.
Retail consumers often find ETNs appealing for gaining crypto exposure without needing a direct crypto wallet, although their entry marks the return to a previously restricted market segment.
“Since we restricted retail access to cETNs, the market has evolved, and products have become more mainstream and better understood. We’re providing consumers with more choice, while ensuring there are protections in place,” said David Geale, who heads FCA’s payments and digital finance team.
Ongoing Restrictions and Nuance
Despite this shift, the FCA’s broader ban on complex crypto derivatives, including futures and options, remains fully in place. The decision signals an acknowledgment of market evolution but stops short of an overall endorsement.
A Shift from FCA Tone
This represents a significant change from earlier FCA warnings about risks. The authority had previously suspended trading in contracts for difference (CFDs) – a derivative product really for crypto – citing “the potential for rapid and significant fluctuations in value,” “fraud, error and dishonest trading,” and “imperative valuation challenges as an outcome” attached to these instruments.
The U-turn also coincides with heightened regulatory activity:
- Lawmakers and groups called for a proactive strategy via an All-Party Parliamentary Group relaunched earlier this week.
- Earlier this week, Parliament relaunched its All-Party Parliamentary Group on crypto and digital assets, led jointly by Labour MP Gurinder Josan and Conservative peer Ed Vaizey.
- Finance Secretary Rachel Reeves is consulting on a Financial Services and Markets Bill, part of which focuses on cryptoassets.
- The FCA itself recently published proposals for its digital assets supervision regime.
Josan commented: “Our goal is to make the UK the safest place for consumers and the best place for businesses to invest and build.” Treasury measures aim to embed clearer rules, reflecting a growing regulatory infrastructure around an asset class previously viewed with caution by official bodies.
