Financial Conduct Authority Eyes Retail Crypto ETN Access in Regulatory Shift

The FCA's ban on retail access to cryptoasset derivatives will remain in place. The regulator said it will continue monitoring market developments and reviewing its approach to high-risk investments.

The UK's Financial Conduct Authority (FCA) has said it proposes lifting its ban on selling crypto exchange traded notes to retail investors, marking a significant shift in the regulator's approach to digital asset products.

The move would allow individual consumers to purchase cETNs through FCA-approved investment exchanges, rather than restricting access to professional investors only. Similar products are already available to retail investors in other jurisdictions.

Under the proposals, cETNs would need to be traded on a recognised investment exchange to be accessible to retail customers. Financial promotion rules would continue to apply, ensuring consumers receive information about risks and are not offered inappropriate incentives to invest.

David Geale, Executive Director of Payments and Digital Finance at the FCA, said: "This consultation demonstrates our commitment to supporting the growth and competitiveness of the UK's crypto industry. 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."

The FCA initially banned retail access to crypto derivatives and ETNs in January 2021, citing concerns about volatility and the potential for consumer losses.

In March 2024, the regulator indicated it would not object to requests from recognised investment exchanges to create UK listed market segments for crypto-backed ETNs, but restricted access to professional investors only.

The latest consultation forms part of the FCA's broader effort to establish a comprehensive regulatory framework for cryptoassets. The regulator has published its crypto roadmap and recently issued proposals covering stablecoins and other aspects of the regulatory regime.

The crypto ETN proposal was announced alongside other measures in the FCA's quarterly consultation paper aimed at reducing regulatory burdens and supporting economic growth. These include simplifying reporting requirements for funds' value assessments, which will generate cost savings for 149 firms managing more than 3,900 funds, and removing unnecessary data reporting requirements affecting nearly all firms.