UK Regulator Set to Open Crypto ETNs to Retail Investors

In a landmark move signaling a shift in the UK's stance on crypto investments, the Financial Conduct Authority (FCA) has proposed lifting its ban on the sale of cryptocurrency-linked Exchange-Traded Notes (ETNs) to retail investors. This decision, announced on June 6, 2025, could mark a turning point in how the UK approaches crypto regulation, aligning it with jurisdictions like the US and EU.

Background: Why the Ban Was Imposed

The FCA first implemented the ban in January 2021, citing the high volatility, market manipulation risks, and lack of clear valuation of crypto assets. The prohibition applied to derivatives and ETNs referencing unregulated cryptoassets, particularly targeting the protection of unsophisticated investors. Until now, only professional investors had access to these instruments.

What Has Changed?

In the latest consultation paper, the FCA acknowledges the maturing of the crypto market and a growing demand for safer investment vehicles among retail investors. As a result, the authority is now considering permitting the sale of crypto ETNs to individual investors, provided the products are listed on recognized exchanges and offered by authorized firms.

According to David Geale, FCA's Director of Retail Banking and Payments Supervision: We want to support a competitive and vibrant financial sector. As the market evolves, it is appropriate to review our approach to ensure it remains proportionate."

ETNs: What Are They?

Exchange-Traded Notes (ETNs) are unsecured debt securities that track an underlying asset—in this case, cryptocurrencies like Bitcoin or Ethereum. Unlike ETFs, ETNs don’t hold the asset itself but offer exposure to its price movements. For many investors, ETNs represent a less direct but regulated way to gain access to the crypto market.

Conditions and Risk Warnings

While the FCA is open to allowing retail access, it is imposing stringent conditions:

ETNs must be listed on UK-recognized exchanges

Firms must adhere to the FCA’s marketing rules, including prominent risk warnings

There must be no monetary or non-monetary inducements to sell these products

The FCA emphasized that these products are still high risk and may not be appropriate for all retail investors. Distributors must ensure that buyers understand the potential to lose all invested capital.

Consultation Period and Next Steps

The FCA has opened a public consultation period until July 7, 2025. Market participants, industry groups, and consumers are invited to submit their feedback. A final decision and implementation timeline are expected in Q3 2025.

Global Context

The UK’s move mirrors developments in other major economies. The US Securities and Exchange Commission (SEC) approved several Bitcoin spot ETFs in early 2024. Similarly, the European Union’s Markets in Crypto-Assets (MiCA) framework provides a regulated structure for crypto ETPs.

By opening the door to crypto ETNs, the FCA aims to strike a balance between investor protection and fostering innovation in the financial services sector.

Market Implications

Analysts expect that a positive decision could lead to broader institutional and retail adoption of crypto-linked financial products in the UK. It may also encourage local exchanges and fintech firms to develop new offerings tailored for a compliant and regulated market.

As the FCA repositions itself in the evolving landscape of digital finance, this proposal stands as a significant milestone towards legitimizing and integrating crypto assets within traditional investment frameworks.

Source：reuters.com

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⚠️ Disclaimer:

This article is for informational purposes only and does not constitute financial advice. Always do your own research before making any financial decisions.