UK lifts ban on crypto-linked notes for retail investors after 5 years

UK lifts ban on crypto-linked notes for retail investors after 5 years
Regulation
The UK is once again allowing citizens to buy crypto ETNs. Illustration: Gwen P; Source: Shutterstock
  • The UK will allow retail crypto note trading again starting in October.
  • ETNs offer crypto exposure without direct asset ownership.
  • Lawmakers say the market has matured since its ban.

Crypto-linked investment products are making a comeback in the UK, as regulators move to restore retail investors’ access to markets once deemed too risky.

The Financial Conduct Authority announced Friday that retail traders will once again be allowed to buy exchange-traded notes tied to cryptocurrencies like Bitcoin and Ethereum, ending a five-year ban imposed in 2021.

The change takes effect on October 8 and will apply only to ETNs listed on regulated UK exchanges.

Unlike ETFs, which are backed by physical holdings, ETNs are debt instruments issued by financial institutions that track the price of an underlying asset or index.

While they work differently under the hood, many investors use them for the same purpose: gaining exposure to crypto without going through the hassle of holding the coins themselves.

“Since we restricted retail access to cETNs, the market has evolved, and products have become more mainstream and better understood,” said David Geale, executive director of payments and digital finance at the FCA. “We’re providing consumers with more choice, while ensuring there are protections in place.”

However, the regulator stressed that its ban on crypto derivatives for retail investors, which includes futures and options, will remain in place.

Tone shift

It’s a notable shift in tone from the UK regulator, which had cited extreme volatility, fraud risks, and valuation challenges when it first banned crypto ETNs and derivatives in January 2021.

The reversal also comes as lawmakers and industry groups ramp up pressure for a more proactive regulatory approach.

Earlier this week, Parliament relaunched its All-Party Parliamentary Group on crypto and digital assets, a cross-party coalition supported by industry body CryptoUK.

The group, now chaired by Labour MP Gurinder Josan and Conservative peer Ed Vaizey, said it plans to scrutinise upcoming digital asset regulations and push for clarity.

“Our goal is to make the UK the safest place for consumers and the best place for businesses to invest and build,” Josan said in a Wednesday press release.

Regulators and the Treasury have also stepped up efforts. In April, UK Chancellor Rachel Reeves published draft legislation aimed at establishing a regulatory framework for cryptoassets, while the FCA launched a consultation in May on how it should supervise digital assets.

Kyle Baird is DL News’ Weekend Editor. Got a tip? Email at kbaird@dlnews.com.