UK FCA to Lift Ban on Crypto ETNs for Retail Investors, Bringing the UK in Line with Global Standards

The Financial Conduct Authority (FCA), the UK’s primary financial regulator, has announced its intention to lift the ban on crypto exchange-traded notes (ETNs) for retail investors.

This decision marks a significant shift in the regulator’s approach to digital assets, aligning the UK with other global financial hubs such as the US, Canada, and the European Union. The FCA aims to bolster the UK's growth and competitiveness in the crypto sector, allowing individual investors to access ETNs traded on FCA-approved investment exchanges.

David Geale, FCA's executive director of payments and digital finance, stated, “This consultation demonstrates our commitment to supporting the growth and competitiveness of the UK's crypto industry. We want to rebalance our approach to risk, and lifting the ban would allow people to choose whether such a high-risk investment is right for them, given they could lose all their money”.

Historical Context and Market Maturity

Since January 2021, the FCA has prohibited the sale, marketing, and distribution of crypto derivatives and ETNs to retail consumers due to concerns over their high-risk nature. This restriction applied to all UK-regulated platforms and brokers.

However, in March 2024, the FCA updated its stance, allowing Recognized Investment Exchanges (RIEs) to list crypto asset-backed ETNs exclusively for professional investors. Despite this, these products saw limited trading volumes compared to their US counterparts.

Kraken's UK General Manager Bivu Das praised the FCA’s latest move, calling it a "major milestone for the UK's crypto ecosystem." He further noted that such regulatory developments are essential for the UK to maintain its competitive edge in the global digital asset market.

Implications for the UK Crypto Ecosystem

The decision to lift the ban is part of a broader regulatory roadmap aimed at establishing the UK as a global hub for digital assets. Comprehensive regulations covering stablecoins, trading platforms, lending, staking, and custody are also currently under consultation, with full implementation expected by 2026.

Diego Ballon Ossio, a partner at Clifford Chance, commented via email, “This development is fully aligned with the U.K.'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 U.K. is open to crypto”.

While the FCA’s ban on retail access to crypto derivatives remains in place, the regulator emphasized the importance of financial promotion rules to ensure consumers are adequately informed about risks associated with these high-risk investments. This cautious yet progressive approach reflects the FCA’s commitment to balancing innovation with consumer protection.