The UK's Financial Conduct Authority (FCA) is set to lift the ban on cryptocurrency exchange-traded notes (ETNs) imposed on retail investors in 2019. According to an announcement made on August 1, the UK regulator will remove restrictions on retail investors participating in crypto ETN trading starting Wednesday, provided that these products are traded on "FCA-approved UK domestic investment exchanges." Unlike exchange-traded funds (ETFs), which remain banned for retail investors, ETNs represent debt securities linked to cryptocurrencies and do not rely on any underlying assets for support.
As the lifting of the ban approaches, businesses operating in the UK are assessing the implications of this regulatory change for retail investors. The world's largest asset management firm, BlackRock, is reportedly exploring options to offer its iShares Bitcoin exchange-traded product in preparation for retail trading opening on or after October 8.
Bitwise, which has its European headquarters in London, saw its CEO, Hunter Horsley, express on the X platform, "We are finally able to serve more investors in the European domestic market long-term, and we are incredibly excited about this."
Ian Taylor, a board advisor at the UK Digital Asset Trade Association CryptoUK, told Cointelegraph, "So far, the UK has been isolated in the ETN space. We look forward to this initiative strengthening consumer protection mechanisms and continuing to push for the lifting of the ban on retail investors participating in strictly regulated derivatives trading."
According to the announcement from the FCA in August, any asset management company planning to offer ETN trading to UK retail investors must ensure that its products are listed on "recognized investment exchanges." This decision was made after consultations with several businesses, industry associations, and consumer organizations.
Companies operating in the UK, such as CoinShares and Bitwise, will be allowed to launch exchange-traded products involving digital asset risks. However, according to the Financial Times, retail investors may have to wait up to a week to trade, partly because the FCA will not begin accepting product prospectuses until September 23, two weeks before the ban is lifted.
The regulator will need to review the products submitted by companies and raise inquiries about potential issues.
As of Friday, the FCA has not indicated plans to lift similar bans on retail investors regarding exchange-traded funds (ETFs) and cryptocurrency derivatives.
In the announcement lifting the ETN ban in August, the FCA clearly stated, "Despite calls from several consulted institutions to open retail investor participation in crypto asset ETF trading, under our current fund regulatory framework, ETFs marketed to UK retail investors cannot directly allocate to crypto assets. To open retail investor participation in crypto asset ETF trading, the existing regulatory framework must first be updated."
In stark contrast, spot cryptocurrency ETFs have been open for trading in the US market since receiving approval from the Securities and Exchange Commission in January 2024. However, due to Congress's failure to pass a government funding bill by October 1, the regulator is currently operating under constraints, affecting its ability to approve new crypto ETF products.
Related: The Bank of Vietnam expects credit growth amid the rapid proliferation of cryptocurrencies.
Original: “UK Prepares to Lift Crypto ETN Ban, Multiple Companies Express Views”
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