Financial Conduct Authority in the UK has lifted its ban on retail investors purchasing exchange-traded product (ETPs), which are tied to cryptocurrency.
This move is part of a bid to improve Britain’s competitiveness in the crypto market and align it with that of the United States where the popularity for crypto ETFs has soared under President Trump.
The new regulations, if implemented, would give retail investors the ability to buy exchange-traded note (ETN) that are backed by cryptocurrency like Bitcoin or Ether as long as they’re listed on FCA approved exchanges.
These products are restricted for professional investors, despite the fact that they can be traded on places like London Stock Exchange.
US market pressure drives policy shift
As crypto-investment products gain rapid popularity in the US, FCA is rethinking its policy.
The Spot Bitcoin Exchange Traded Funds (ETFs) introduced in the early part of 2024 now have assets worth over $130 billion. This is a huge amount compared to the $16 billion managed by European Crypto ETPs.
This disparity has increased pressure on UK regulators, who are now under more pressure to encourage innovation and stop the UK from falling behind.
Source: Bloomberg
David Geale is the FCA executive director for payments and digital asset. He said, “This consultation shows our commitment to support the growth and competition of the UK crypto industry.”
We want to change our risk-taking approach and let people decide if such an investment with high risks is for them.
The FCA will continue to ban retail access of cryptoassets derivatives.
FCA changes its stance on crypto
This proposal is a significant departure from previous messages of the regulator.
The FCA will warn consumers in 2021 that investing in cryptocurrency and other related products can lead to a total loss of money.
“Investing or lending money to cryptoassets and investments linked with them is a very risky business. The FCA warned consumers that they could lose their entire investment if they invest in this type of product.
The Financial Ombudsman Service and the Financial Services Compensation Scheme did not protect such investments at the time.
The FCA is now signaling that it will give retail investors greater autonomy, while still being aware of all the possible risks.
FCA lifts ban on ETNs in crypto currency. This is a great news. Since we met HMT a few years back, the FCA announced that it would lift its ban against offering ETNs for crypto currencies to retail investors. The FCA will be able to sell ETNs directly to clients.
Reforms to the regulatory system are underway
This proposal forms part of the UK Government’s broader efforts to create a comprehensive regulation regime for digital assets.
The Finance Minister Rachel Reeves said that the country wants to be a leader “in digital assets”. She also stressed that regulations should not hinder innovation, but rather support it.
A draft legislation was introduced in April that outlines the framework for bringing exchanges, brokers and crypto-service providers under regulatory control.
Treasury officials said that the new rules will crackdown on bad actors, while giving legitimate companies a more clear path towards compliance.
Recently, the regulator published its roadmap for crypto and proposals regarding stablecoins.
Final rules are expected in 2025.
The post FCA lifts retail ban on Crypto ETNs in UK to increase market competition may be updated as new developments unfold.
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