- The UK’s watchdog for finance is preparing to reverse its previous prohibition on crypto ETNs.
- This could unlock almost a trillion dollars in tax-advantaged savings for crypto investments.
As the UK’s Financial Conduct Authority (FCA) gears up to remove restrictions on cryptocurrency exchange-traded notes, nearly $1 trillion held within UK savings accounts could potentially be used for investments in crypto assets.
Exchange-traded notes (ETNs) are a type of debt security that mirrors the price fluctuations of an underlying asset. These notes are bought and sold on stock exchanges, functioning in a similar manner to the more common exchange-traded funds (ETFs).
Back in January 2021, the FCA implemented a rule that prevented the selling, promotion, and distribution of derivatives and ETNs linked to unregulated crypto assets to retail investors.
This restriction is scheduled to be lifted on October 8th, a development that has the potential to position the United Kingdom as a significant participant in the worldwide cryptocurrency arena.
“The UK possesses the potential to become the leading crypto market in Europe, especially if the eligibility of crypto assets for inclusion in individual savings accounts (ISAs) and self-invested personal pensions (SIPPs) is officially confirmed,” stated Dan Gold, the founder of Stratiphy, an investment platform powered by artificial intelligence, in an interview with DL News.
In the UK, residents have the option of depositing funds into individual savings accounts (ISAs) and self-invested personal pensions (SIPPs). Investments made through these accounts are exempt from taxes, but the range of investment options is limited to assets available on regulated exchanges.
Figures released by the government indicate that UK investors held over $930 billion in assets within these ISA and SIPP accounts as of 2023.
However, it is not yet certain whether crypto ETNs will be immediately eligible for inclusion in these accounts. Alex Campbell, the head of external affairs at Freetrade, a UK-based fintech platform, mentioned to DL News that the firm is awaiting official clarification from HMRC, the UK’s tax authority.
“Our understanding is that ETNs tied to Bitcoin and Ethereum will be available, and those are the ones we intend to offer,” Campbell confirmed.
This development arises as crypto regulation in the UK is undergoing renewed scrutiny following a pause after the 2024 general election.
In August, a group of parliamentarians began efforts to prioritize cryptocurrency within the legislative agenda.
On September 17th, the FCA initiated a consultation process regarding proposed crypto regulations. A week later, the UK and the US formed a joint taskforce with the objective of strengthening cooperation on the regulation of crypto assets and other financial matters.
Potential Boost in Adoption
According to a survey conducted by Norstat on behalf of IG, a UK-based trading platform, this regulatory shift could significantly stimulate the UK crypto market.
The survey revealed that approximately 30% of the 2,500 UK investors surveyed would consider investing in crypto through ETNs. This signifies a substantial potential increase compared to current crypto ownership rates. A report from the FCA published in November 2024 indicated that only 12% of UK residents currently own cryptocurrencies.
“We anticipate a surge in crypto adoption, particularly among younger demographics who are already familiar with digital assets,” stated Michael Healy, the UK managing director at IG, in a released statement. “This could signify the beginning of a new phase of mainstream crypto investing in the UK.”
An IG spokesperson told DL News that the platform anticipates launching crypto ETNs for its customers within the next few months. Several other UK-based trading platforms, including Stratiphy and Freetrade, have also informed DL News of their plans to offer crypto ETNs as soon as possible.
IG’s survey also highlighted that the primary appeal of crypto ETNs for interested investors is their perceived safety and the regulatory oversight they provide.
Crypto ETNs will be traded on familiar exchanges and trading platforms, alongside stocks and other regulated financial instruments.
“For many individuals, having this straightforward method of accessing crypto is far more appealing than navigating the complexities of establishing accounts on a separate exchange,” Campbell explained.
While the ban on ETNs is being lifted, the prohibition on crypto exchange-traded funds (ETFs) remains in effect in the UK.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at
tim@dlnews.com
.