UK Financial Conduct Authority To Lift Ban On Crypto ETNs To Support UK Growth And Competitiveness

It would mean cETNs could be sold to individual consumers, rather than just professional investors, in the UK, if they’re traded on an FCA-approved investment exchange (a recognised investment exchange or RIE).  

Financial promotion rules would apply, so 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.

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.’

This is the latest development as the FCA continues 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.

The FCA’s ban on retail access to cryptoasset derivatives will remain in place. The regulator says it will continue to monitor market developments and consider its approach to high-risk investments.

The announcement comes alongside other proposals outlined in a quarterly consultation paper from the FCA, to further reduce burdens on firms and support economic growth:

• Simplifying reporting requirements for funds’ assessments of value, following feedback to the Consumer Duty Call for Input, which will lead to a significant cost saving for 149 firms who manage more than 3900 funds.
• Removing more unnecessary data reporting, that will benefit nearly all firms. 

Background

1. Read our consultation on stablecoins and cryptoasset custody.  
2. Read our consultation on prudential requirements for cryptoasset firms.
3. Read our discussion paper on new regulated crypto activities.
4. Read our crypto roadmap.  
5. In January 2021, the FCA banned the sale, marketing and distribution of derivatives and ETNs that reference unregulated transferable cryptoassets to retail clients.
6. In March 2024, the FCA announced we would not object to requests from recognised investment exchanges (such as the London Stock Exchange) to create a UK listed market segment for cryptoasset-backed exchange traded notes (cETNs) for professional investors.  
7. The FCA grants recognition orders to investment exchanges in the UK to make sure they meet regulatory standards. This power is provided under the Financial Services and Markets Act 2000 for the FCA to consider applications from UK entities (a body corporate or an unincorporated association) for recognition as a UK recognised body. Examples of recognition requirements include equivalent protection for investors.