The UK Financial Conduct Authority (FCA) has officially lifted its ban on crypto exchange-traded notes (cETNs) for retail investors, signaling a significant shift in policy to expand access to digital asset investments in the country.
Initially introduced in 2021 due to concerns over market volatility and consumer protection, the ban on crypto ETNs was deemed necessary by the FCA at the time. However, with the market maturing and infrastructure improving, the regulator has decided to reintroduce these products to UK-regulated markets.
David Geale, the FCA’s Executive Director of Payments and Digital Assets, emphasized that the decision to lift the ban reflects changing market conditions. He cited advancements in understanding crypto investment products and improved infrastructure as key factors in the decision.
This move aligns with global trends, particularly in the U.S., where crypto-linked ETFs tied to popular cryptocurrencies like Bitcoin and Ethereum have seen significant growth. The digital asset market as a whole has gained traction in recent years, thanks to a more supportive regulatory environment.
Despite the decision to allow crypto ETNs for retail investors, the FCA is urging caution. These products are not protected by the Financial Services Compensation Scheme (FSCS), meaning investors may not be reimbursed in case of losses. Providers of cETNs are required to adhere to updated financial promotion rules and ensure transparency in their marketing materials.
Geale stressed the importance of transparency and investor education in the crypto space. He emphasized that firms offering cETNs must help customers assess whether these instruments align with their financial goals and risk tolerance.
While crypto ETNs are now permitted for retail investors, the FCA is still restricting retail trading of crypto derivatives due to their complexity and volatility. This policy update is part of the UK’s efforts to establish a structured regulatory framework for digital assets, with additional proposals expected to enhance investor protection and market integrity in the future.