UK Regulator FCA to Lift Ban on Crypto ETNs for Retail Investors

U.K. financial regulator the Financial Conduct Authority (FCA) said it will allow consumers access to crypto exchange traded notes (cETNs), as the watchdog aims at growing digital assets in Britain.

The move means cETNs could be sold to individual consumers rather than just professional investors in the U.K., provided these are traded on an FCA-approved investment exchange (a Recognized Investment Exchange or RIE), according to an FCA press release on Friday.

FCA pointed out that similar products are already available in other countries. The FCA’s ban on retail access to cryptoasset derivatives will remain in place, while the regulator continues to monitor market developments and consider its approach to high-risk investments, the release said.

As regulatory regimes are put in place around the world, the U.K. is feeling the need to compete, as evidenced by U.K. government consultations on crypto rules and recent comments from the Chancellor of the Exchequer Rachel Reeves.

“This consultation demonstrates our commitment to supporting the growth and competitiveness of the UK’s crypto industry,” said David Geale, executive director of payments and digital assets at the FCA.

“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,” Geale said in a statement.

The U.K.’s existing financial promotion rules would apply so consumers get information on the risks and would not be offered inappropriate incentives to invest, in the same way as if they bought cryptoassets directly, the FCA said.

“This development is fully aligned with the U.K.’s ambition to position itself as a sophisticated jurisdiction in the crypto space,” said Diego Ballon Ossio, Partner at Clifford Chance via email.

“It will not only unlock exposure to crypto assets for retail investors but stands as signal that the U.K. is open to crypto. More work is needed on the Prudential Treatment of these assets but we are certainly heading in the right direction,” he said.