Toby Lawes
3 min read
The Financial Conduct Authority (FCA) is proposing to lift the ban on selling crypto exchange-traded products to retail investors in a bid to "support U.K. growth and competitiveness."
According to the press release, the U.K. regulator is launching a consultation around allowing individual investors to buy crypto ETPs so long as they are listed on an FCA-approved exchange, such as the London Stock Exchange (LSE).
Current regulation permits only professional U.K. investors access to the product class, but that could change as early as September.
The “consultation demonstrates our commitment to supporting the growth and competitiveness of the U.K.’s crypto industry,” commented David Geale, executive director of payments and digital assets at the watchdog.
Mhairi Jackson, manager for funds and asset management policy at the FCA, hinted at the U-turn at ETF Stream’s recent ETF Ecosystem Unwrapped event.
“As we expand our regulatory perimeter to include crypto assets in the future, we will be thinking about when the right time is to allow retail access to crypto ETNs," she said.
European crypto ETPs are generally structured as exchange-traded notes—a form of debt instrument. Because the underlying cryptocurrency collateralises them, ETP providers often describe them as "physically backed."
The FCA banned the sale of them as well as crypto derivatives to retail investors in January 2021, warning that if “consumers invest in these types of product, they should be prepared to lose all their money.”
But the FCA’s Geale said, “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.”
The ban on crypto derivatives is to remain in force, but the regulator will “continue to monitor market developments and consider its approach to high-risk investments.”
Laurent Kssis, founder at CEC Capital, a crypto ETP consultancy, said the change in stance was "about time."
The FCA has been under "tremendous pressure" to lift the ban in recent years, he added, noting that retail investors can already buy crypto ETPs in other European jurisdictions. The U.S. Securities and Exchange Commission approved spot bitcoin ETFs in January 2024.
Duncan Moir, president at 21shares, Europe’s largest crypto-ETP provider, said if the ban is removed, “U.K. retail investors will finally get access to regulated products on regulated exchanges. That is important because, to date, they've been forced to buy cryptoassets directly.”
