The Financial Conduct Authority (FCA) has proposed lifting its existing ban on offering crypto exchange traded notes (cETNs) to retail investors in a move it says would support UK growth and competitiveness.
Crypto ETNs are investment products that enable consumers to invest in cryptocurrencies, without buying or storing the crypto themselves. These notes hold the same value as a nominated cryptocurrency, meaning users can invest in them without dealing with crypto wallets, passwords, or exchanges.
Should the FCA proposals come into action, crypto ETNs could be sold to individual consumers in the UK, rather than just professional investors, so long as they are traded on an FCA-approved investment exchange.
David Geale, executive director of payments and digital finance at the FCA, said: “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 make the choice on whether such a high-risk investment is right for them, given they could lose all their money.”
According to an FCA release, financial promotion rules would apply, meaning 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 proposed move comes as the FCA continues efforts to establish a regulatory framework for crypto. The regulator has outlined its crypto roadmap and recently published proposals on stablecoins as well as other aspects of the regime.
UK continues efforts to bolster digital asset position
The proposals largely appear to have been well received by industry participants, as they would enable the UK to remain competitive with other countries that already allow retail investors to buy cETNs.
Sam Riordan, executive director of banking and payments at Capco
“The FCA’s decision to lift the ban on crypto exchange-traded notes for retail investors is yet another sign of the UK’s ambition to become a leading centre for digital assets,” explains Sam Riordan, executive director of banking and payments at consultancy Capco, in reaction to the announcement.
“For retail customers, this move represents a significant expansion of choice, opening the door to regulated access to crypto-backed investment products previously available only to professional investors. This could bring significant upsides – with careful structuring and customer education, cETNs could offer higher yield exposure for risk-seeking consumers, particularly at a time when traditional assets are struggling to deliver meaningful returns.
“This move reflects a significant shift in policy thinking from the FCA, moving to a world where risk, when properly disclosed and well-understood, need not be a barrier to access. That said, it does come with guardrails. The FCA is clear that financial promotion rules will apply, meaning no over-promotion, no hidden risks, and no inappropriate incentives. This is crucial in protecting customers, as these instruments can be volatile and high-risk. Vulnerable and low-information investors are particularly in need of protection, and it’s important that firms give consideration to how these products are explained and ensure robust suitability frameworks are in place.
“This announcement fits within a broader acceleration of the UK’s digital finance architecture – from the emergence of tokenised financial instruments, such as the digital pound, to major initiatives like the Regulated Liability Network. It’s part of a wider transition toward a more programmable, efficient, transparent, and inclusive financial system.”
Catching up
cETNs are already available in a number of countries for retail investors in Europe, including Germany, Sweden and Switzerland.
Michelle Kirschner, co-chair of Global Financial Regulatory practice at Gibson Dunn
Michelle Kirschner, partner at Gibson Dunn and co-chair of the firm’s Financial Regulatory Practice Group, also discussed the move: “This is an interesting move from the FCA and is in line with the recent change in mood music at the FCA as regards crypto assets generally. It will (if adopted) bring the UK into line with the position in many other major markets globally regarding cETNs.
“In March 2024, the FCA invited recognised investment exchanges to create a UK-listed market segment for crypto asset-backed ETNs. However, the FCA stated at the time that any such applications must demonstrate that the products would only be made available to professional investors.
“The London Stock Exchange listed its first crypto asset-backed ETNs on 28 May 2024 on the professional investor-only segment of the market. This consultation by the FCA to allow retail investors in the UK to access such ETNs will expand the market for crypto ETNs in the UK. It appears that the FCA will continue with the ban on crypto derivatives for retail investors in the UK at least for the time being.”
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