‘The market has evolved’: UK financial regulator to open retail access to crypto ETNs

The Financial Conduct Authority, the UK’s financial regulator, is set to open up access to crypto exchange-traded notes, dubbed “cETNs” for retail customers, expanding availability beyond professional investors for the first time.

The move aligns the UK with countries such as the U.S., Canada, Hong Kong, and across the EU by enabling 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.

“Since we restricted retail access to cETNs, the market has evolved, and products have become more mainstream and better understood,” FCA Executive Director of Payments and Digital Finance David Geale said. “In light of this, we’re providing consumers with more choice, while ensuring there are protections in place. This should mean people get the information they need to assess whether the level of risk is right for them.”

The announcement follows a consultation process carried out earlier this year, with the FCA previously proposing to lift the ban on crypto ETNs for retail investors in June. While a specific timeline remains elusive, the agency said retail access would be available “soon.”

Unlike U.S. spot crypto ETFs, ETNs do not necessarily hold underlying assets directly. 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.

Firms offering these products to retail investors must comply with the Consumer Duty, which requires them to deliver good outcomes for customers. However, the products won’t be covered by the Financial Services Compensation Scheme, which protects consumers when firms fail.

Financial promotion rules still apply to ensure clear, fair information and prevent misleading incentives. “Consumers should ensure they understand the risks before deciding to invest,” the FCA said in the statement.

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

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 as part of the FCA’s crypto roadmap, with full implementation expected in 2026.