- The UK's financial regulator is about to lift a ban on crypto exchange-traded notes.
- It could open crypto investments to $930bn in tax-efficient savings accounts.
Nearly $1 trillion in British savings accounts could open to crypto investment as the UK Financial Conduct Authority prepares to lift a ban on crypto exchange-traded notes.
Exchange-traded notes, or ETNs, are debt instruments that track an underlying asset’s price. They are listed and traded on exchanges, and in most respects function the same way as the more common and popular exchange-traded funds.
In January 2021, the FCA banned the sale, marketing, and distribution of derivatives and ETNs that reference unregulated crypto assets to retail investors.
That ban will be reversed on October 8, a move that could vault the UK into a major player in the global crypto market.
“The UK has the potential to be the largest crypto market in Europe, especially if crypto’s eligibility for individual savings and self-invested personal pension accounts is confirmed,” Dan Gold, founder of Stratiphy, an AI-powered investment platform, told DL News.
In the UK, residents can deposit money to individual savings and self-invested personal pension accounts. Investors do not need to pay tax on investments made through these accounts, however investment options are limited to assets available on regulated exchanges.
UK investors held over $930 billion in assets through these so-called ISA and SIPP accounts as of 2023, according to government statistics.
It’s not guaranteed that crypto ETNs will initially be eligible for these accounts, however. Freetrade, a UK-based fintech platform, is still waiting on final guidance from HMRC, the UK’s tax authority, Alex Campbell, the firm’s head of external affairs, told DL News.
“Our understanding is that Bitcoin and Ethereum ETNs will be on offer and those will be the ones we offer,” Campbell said.
The development comes as crypto regulation in the UK gets a fresh look after a year-long hiatus following the 2024 general election.
In August, a parliamentary group started working to bring cryptocurrency back to the forefront of the legislative process.
On September 17, the FCA opened a consultation on proposed crypto rules. A week later, the UK and US established a new taskforce, which aims to enhance collaboration on crypto asset regulation and other financial activities.
A surge in adoption
The move could give the UK crypto market a significant boost, according to a survey conducted by Norstat on behalf of UK-based trading platform IG.
It found that out of 2,500 UK investors polled, 30% would consider investing in crypto via ETNs. That represents a significant potential increase from current levels of crypto ownership. A November 2024 report from the FCA found that just 12% of UK residents owned crypto.
“We expect a surge in crypto adoption, especially among younger generations already comfortable with digital assets,” Michael Healy, UK managing director at IG, an online trading platform, said in a statement. “This could mark the start of a new phase of mainstream crypto investing in the UK.”
An IG spokesperson told DL News the platform expects to launch crypto ETNs for customers in the next couple of months. Several other UK-based trading platforms, including Stratiphy and Freetrade, told DL News they plan to offer crypto ETNs as soon as possible.
IG’s survey also found that the main appeal of crypto ETNs among interested investors is their perceived safety and regulatory oversight.
Crypto ETNs will trade on familiar exchanges and trading platforms alongside stocks and other regulated financial instruments.
“For many folks, having this simple way to get access to crypto is particularly more attractive than going through the hassle of setting up accounts on a separate exchange,” Campbell said.
While the ban on ETNs will be lifted, crypto exchange-traded funds remain banned in the UK.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
