FCA to lift ban on crypto ETNs for retail investors, bringing UK in line with many other countries

The Financial Conduct Authority, the UK’s financial regulator, is proposing to lift a ban on crypto exchange-traded notes, dubbed “cETNs” for retail customers — opening up access beyond professional investors for the first time.

The move brings the UK more in line with countries like the U.S., Canada, Hong Kong, and across the EU by allowing individuals to access crypto investment products, provided they are traded on an FCA-approved investment exchange (a recognized investment exchange or RIE), the regulator said in a release on Friday.

The announcement forms part of a broader set of proposals in the FCA’s latest quarterly consultation paper aimed at reducing burdens on firms and supporting economic growth. It also marks the FCA’s latest step in building out a regulatory framework for crypto, following recent proposals on stablecoins and other parts of the regime outlined in its crypto roadmap.

“This consultation demonstrates our commitment to supporting the growth and competitiveness of the UK’s crypto industry,” David Geale, executive director of payments and digital finance at the FCA, said. “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.”

Unlike U.S. spot bitcoin ETFs, ETNs do not directly hold underlying assets. Instead, they are debt securities issued by financial institutions that promise to pay the holder a return tracking an asset’s performance minus fees and expenses.

Financial promotion rules would apply to ensure consumers are informed about the risks and are not offered inappropriate incentives, just as if they were purchasing crypto assets directly. However, the FCA did not specify a timeline for when the proposed changes could take effect.

“This is a major milestone for the UK’s crypto ecosystem,” Kraken UK General Manager Bivu Das told The Block. “Repealing the ban on crypto ETNs reflects a welcome shift by the FCA, acknowledging that the market has matured significantly and that outdated restrictions no longer serve their intended purpose. Regulatory moves like this are critical if the UK is to stay competitive in the race to lead in digital assets.”

Kraken is the leading platform for GBP-denominated crypto trading in the UK and one of the largest FCA-registered crypto asset firms, employing over 300 staff across the country. “At Kraken, we believe all investors, regardless of sophistication, deserve the tools and protections to navigate this space securely. FCA-registered platforms like ours play a vital role by offering a diverse range of crypto assets, coupled with robust disclosures, deep liquidity, and high standards of transparency to support informed trading decisions.,” Das added.

How we got here

Since January 2021, the FCA has prohibited the sale, marketing, and distribution of crypto derivatives and crypto ETNs to retail consumers, applying to all UK-regulated platforms and brokers. In March 2024, the FCA updated its position to allow RIEs to list crypto asset-backed ETNs for professional investors only — restricted to entities such as investment firms and credit institutions, with stringent controls to ensure orderly trading and investor protection. 

The first UK-listed crypto ETNs from 21Shares, WisdomTree, and Invesco — backed by bitcoin and ether — subsequently launched on the London Stock Exchange in May 2024 but saw limited volumes compared to their U.S. ETF counterparts. Opening these products to retail investors would be a “game changer,” 21Shares UK head Alex Pollak told The Block at the time.

The UK has adopted a phased approach to crypto regulation, aiming to position itself as a global hub for digital assets while prioritizing consumer protection and financial stability.

Comprehensive regulations covering stablecoins, trading platforms, lending, staking, and custody are also currently under consultation, with full implementation expected in 2026.

The FCA’s ban on retail access to crypto derivatives will remain in effect. However, the regulator said it will continue to monitor market developments and review its approach to high-risk investments. UK retail investors are also restricted from directly investing in U.S. spot bitcoin ETFs and similar offshore products.

The Block reached out to the FCA for comment.

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