Retail investors in the U.K. will soon be able to trade crypto-based exchange-traded notes (ETNs), as the Financial Conduct Authority (FCA) prepares to reverse its ban on the vehicles.
In 2021, the FCA banned the sale, marketing and distribution of crypto ETNs and derivatives to retail investors, citing a lack of regulation and the resulting risks to investor protection.
Earlier this year, however, the regulator launched a consultation on reversing its ban for ETNs — and has now confirmed it will do just that in the fall. The prohibition on retail investors buying crypto derivatives will remain in place.
The FCA announced that, effective Oct. 8, firms will be able to give retail investors access to crypto ETNs that are traded on a regulated exchange.
Investors will have some protections when dealing in these instruments — because the rules governing financial promotions will apply, as will the FCA’s consumer duty. However, these investments won’t be covered by the Financial Services Compensation Scheme, the regulator noted.
“Since we restricted retail access to [crypto] ETNs, the market has evolved and products have become more mainstream and better understood. 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,” said David Geale, executive director of payments and digital finance at the FCA, in a release.
The move to allow retail access to crypto ETNs represents the latest step toward the development of a regulatory framework for crypto, the FCA said.
Looking ahead, the regulator said it will “continue to monitor market developments and consider its approach to high-risk investments.”