The Financial Conduct Authority (FCA), the UK’s financial regulatory body, is preparing to remove a restriction initially imposed in 2019 that prevented retail investors from accessing crypto exchange-traded notes (ETNs).
According to a public statement released on August 1st, the UK regulator will end the ban on retail participation in crypto ETNs starting this Wednesday. This access is contingent upon the ETNs being traded on a “UK-based investment exchange” that has been approved by the FCA. It’s worth noting that unlike exchange-traded funds (ETFs), which remain unavailable to retail investors in the UK, ETNs are structured as debt instruments connected to crypto assets, but they aren’t backed by the actual underlying assets.
As the lifting of the ban approaches, companies operating in the UK are actively evaluating the implications of this regulatory shift for retail investors. For instance, BlackRock, a leading global asset manager, is reportedly exploring options for listing its iShares Bitcoin exchange-traded product, anticipating the commencement of retail trading on or after October 8th.
Hunter Horsley, the CEO of Bitwise, a company with European headquarters in London, shared his thoughts on X, mentioning that he is “excited to finally be able to cater to a broader range of investors within our European home market.”
Ian Taylor, a board adviser for CryptoUK, a digital assets trade association, commented to Cointelegraph that “Up until now, the UK has been an exception when it comes to ETNs. We anticipate that this action will bolster consumer safeguards, and we will continue to advocate for the removal of the prohibition on retail investors accessing heavily-regulated derivative products.”
An FCA notice from August specified that any asset management firm intending to provide ETN trading to UK retail investors must ensure that they are listed on a “Recognised Investment Exchange.” This decision came after consultations with various stakeholders, including businesses, industry groups, and consumer advocacy organizations.
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Company Product Launches May Face Delays
Firms such as CoinShares and Bitwise that have operations in the UK will be in a position to provide exchange-traded products that offer exposure to digital assets. However, the Financial Times indicates that retail investors might need to wait up to a week before they can engage in trading, which is partially attributable to the FCA’s late start in accepting prospectuses on September 23rd, just two weeks before the ban’s termination.
The regulatory body is expected to carefully examine the proposals from companies and provide any necessary feedback or raise any concerns.
As of Friday, the FCA has not indicated any plans to lift a similar ban on ETFs or crypto derivatives for retail investors.
“While numerous respondents advocated for retail access to cryptoasset ETFs, the existing regulatory framework for funds does not permit ETFs marketed to UK retail investors to invest directly in cryptoassets,” the FCA stated in its August notice regarding the ETN ban lift. “An update to this framework would be necessary before retail investors could gain access to cryptoasset ETFs.”
Conversely, spot cryptocurrency-linked ETFs have been available for trading in the US since their approval by the Securities and Exchange Commission in January 2024. The SEC is currently operating under limitations following the failure of US lawmakers to pass a bill funding the government beyond October 1st, restricting its capacity to evaluate crypto ETFs.
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