FCA to Unlock Crypto ETNs for UK Retail Investors in Major Policy Shift

The UK’s financial watchdog is preparing to lift restrictions on crypto exchange-traded notes (cETNs) for everyday investors, expanding access beyond institutional players for the first time. On Friday, the Financial Conduct Authority (FCA) announced it will soon allow retail investors in the UK to buy and trade crypto ETNs, a financial product previously available only to institutional investors. The regulator said the decision reflects the growing mainstream adoption and understanding of crypto-backed financial instruments. In a public statement , David Geale, Executive Director of Payments and Digital Finance at the FCA, noted that the market has changed since retail access to cETNs was restricted. He said that greater transparency and oversight now make it possible to give consumers more options, without compromising essential protections. A Move Toward Global Harmonization With this policy update, the UK joins countries like the United States, Canada, Hong Kong, and members of the European Union in opening up crypto-linked investment options to non-professional traders. However, only crypto ETNs listed on recognized investment exchanges (RIEs) approved by the FCA will qualify for retail access. Unlike spot crypto ETFs in the U.S., which hold actual digital assets like Bitcoin or Ethereum, crypto ETNs do not. Instead, they are structured as debt obligations. Rather than owning the asset itself, the issuer promises to deliver returns that closely track the asset’s price, minus any associated costs. As a result, ETNs offer a way to gain exposure without directly holding the crypto. Risk Warnings and Regulatory Safeguards While the FCA's decision introduces new opportunities for everyday investors, the agency has emphasized the need for caution. Crypto ETNs will not be covered under the Financial Services Compensation Scheme (FSCS), meaning consumers won’t have protection in the event of issuer failure. Firms selling these products must comply with the FCA’s Consumer Duty rules. This means they must ensure that marketing and product design serve the best interests of customers. Additionally, financial promotion rules will remain in force, requiring clear, non-misleading disclosures about the risks involved. Crypto Derivatives Ban Remains Despite the updated stance on crypto ETNs, the FCA has reaffirmed its ban on retail trading of crypto derivatives, citing high risk and market volatility. The agency stated that it will continue to monitor the space and adjust its approach to high-risk products when necessary. Over the years, the FCA has gradually eased its hardline stance on digital assets . Since January 2021, it has barred retail access to both crypto ETNs and derivatives. In March 2024, it began allowing professional investors to access regulated cETNs listed on UK exchanges. Among these are products launched on the London Stock Exchange by 21Shares, WisdomTree, and Invesco. While these products attracted modest trading volumes, analysts have predicted that retail access could significantly boost interest and liquidity.  Broader Crypto Oversight in the Works The UK government seeks to make the country a global hub for crypto innovation, and the FCA is playing a central role in this strategy. To support this effort, a comprehensive regulatory framework covering stablecoins, staking, lending, custody, and trading platforms is currently under consultation. Its implementation will be by 2026. Notably, the FCA has stated that the rollout for retail access to crypto ETNs will be by October this year.