UK to Reverse Crypto ETN Ban, Firms Prepare for Retail Access

TLDR

• The UK’s Financial Conduct Authority is set to lift the 2019 ban on crypto ETNs for retail investors.
• Companies like BlackRock and Bitwise are preparing to offer crypto ETNs to retail investors starting in October.
• The FCA will require crypto ETNs to be listed on a Recognised Investment Exchange for retail investors to have access.
• The decision follows consultations with industry stakeholders aimed at improving market access and consumer protections.
• The FCA has yet to lift the ban on crypto ETFs and derivatives for retail investors in the UK.

The UK’s Financial Conduct Authority (FCA) is set to lift its 2019 ban on crypto exchange-traded notes (ETNs) for retail investors. The move will allow crypto ETNs to be traded on FCA-approved, UK-based investment exchanges. This change is expected to have significant implications for companies operating in the crypto sector.

BlackRock and Other Firms Prepare for Retail Access to Crypto ETNs

Major companies, such as BlackRock, are already planning to offer their crypto exchange-traded products to retail investors. BlackRock is reportedly preparing its iShares Bitcoin exchange-traded product for the UK market. The firm expects that the lifting of the ban will allow more retail investors to access crypto ETNs starting on October 8.

The Financial Times notes that the FCA’s decision to lift the crypto ETN ban will likely take a few more days to implement. Companies like CoinShares and Bitwise are also preparing to offer crypto ETNs to UK retail investors. Bitwise CEO Hunter Horsley expressed his excitement, stating that the company is eager to serve European investors in its home market.

Ian Taylor, board adviser to CryptoUK, emphasized the importance of this decision. “We hope this move will improve consumer protections,” he said. Taylor added that the industry will continue to push for broader access to regulated crypto products, such as ETNs.

UK to Allow Trading of Crypto ETNs

The FCA’s decision to lift the ban on crypto ETNs follows consultations with industry stakeholders. Asset managers planning to offer crypto ETNs must list them on a “Recognised Investment Exchange.” This condition aims to ensure that crypto ETNs are traded on reputable, FCA-approved platforms.

The lifting of the crypto ETN ban will allow more firms to bring digital asset-based products to market. However, the FCA has yet to lift the ban on crypto ETFs or derivatives for retail investors. While these products are popular in other markets, they are still restricted in the UK.

The FCA’s August notice clarified that ETFs marketed to retail investors in the UK cannot invest directly in crypto assets. This means that UK retail investors will not yet have access to crypto ETFs unless regulatory frameworks are updated. In the US, spot cryptocurrency ETFs have been available for trading since January 2024, following approval by the Securities and Exchange Commission.

The lifting of the crypto ETN ban is expected to provide more opportunities for retail investors in the UK. The change could lead to increased market participation and a wider range of product options for investors. It also signals that the UK is moving closer to integrating digital assets into its financial system, albeit with some regulatory restrictions.

Companies like CoinShares and Bitwise are closely monitoring the situation. They view the FCA’s decision as a positive step for expanding access to crypto-based products.

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