In a significant development for UK investors, the Financial Conduct Authority (FCA) is set to lift its prohibition on crypto exchange-traded notes (ETNs). This change may provide British savers with enhanced opportunities in the crypto investment space, potentially unlocking nearly $1 trillion in savings.
ETNs are innovative debt securities designed to replicate the price movement of underlying assets. Similar to exchange-traded funds (ETFs), they are traded on exchanges, allowing investors an accessible avenue for exposure to cryptocurrencies without the need to directly own them.
The FCA’s ban, which was enacted in January 2021, restricted retail investors from purchasing or marketing crypto ETNs and certain derivatives associated with unregulated digital assets. However, with the ban scheduled to be lifted on October 8, the UK stands poised to emerge as a major player in Europe’s crypto market.
“With the right regulatory framework, the UK could become Europe’s leading crypto market, particularly if crypto qualifies for tax-efficient individual savings and self-invested personal pension accounts,” remarked Dan Gold, founder of Stratiphy, a cutting-edge AI investment platform, during an interview with DL News.
A Potential Boost from Tax-Advantaged Accounts
A crucial aspect of this shift revolves around whether crypto ETNs will be eligible for well-loved tax-free investment vehicles. In the UK, Individual Savings Accounts (ISAs) and Self-Invested Personal Pensions (SIPPs) allow residents to invest without incurring taxes on their gains, provided the investments are made through regulated exchanges.
As of 2023, these accounts collectively hold over $930 billion in assets. If ETNs are included, even minor reallocations could inject substantial capital into cryptocurrency markets.
The current status regarding eligibility is still uncertain. Freetrade, a fintech platform based in the UK, is eagerly awaiting definitive guidance from the tax authority, HMRC.
“We anticipate offering ETNs linked to Bitcoin and Ethereum, as those are the primary assets we intend to feature,” stated Alex Campbell, head of external affairs at Freetrade.
Heightened Focus on Crypto Regulation
This regulatory shift comes as UK authorities refocus their efforts on digital assets following a hiatus after the 2024 general election. In August, a cross-party parliamentary initiative rekindled discussions on prioritizing crypto legislation.
In September, the FCA responded by initiating a consultation aimed at developing new crypto regulations. Shortly thereafter, the UK and the US established a collaborative task force to enhance their regulatory cooperation concerning cryptocurrencies and financial oversight.
Growing Investor Interest
Recent research indicates that the end of the ban on crypto ETNs could catalyze increased adoption of digital assets. A recent survey conducted by Norstat for IG, a trading platform in the UK, found that 30% of 2,500 investors might consider engaging with crypto via ETNs—an impressive rise from the 12% of UK adults reported to hold crypto in an FCA survey from late 2024.
“We project a surge in crypto adoption, particularly among younger generations already familiar with digital assets,” noted Michael Healy, IG’s UK managing director. “This could signify a transformative phase for mainstream crypto investing in the UK.”
IG plans to introduce crypto ETNs to its customers in the upcoming months, with Stratiphy and Freetrade also preparing to launch ETNs as soon as regulatory approvals are in place.
Familiar Platforms, New Products
The appeal of ETNs for many investors lies in the security of trading on regulated exchanges. In contrast to purchasing cryptocurrencies directly, ETNs are registered alongside traditional financial products like stocks, enhancing accessibility.
“For a lot of investors, the simplicity of getting exposure to crypto through ETNs is far more attractive than navigating the complexities of setting up accounts on various crypto exchanges,” Campbell added.
While the FCA is easing some restrictions on ETNs, the ban on cryptocurrency ETFs remains in effect for the time being. Nonetheless, this regulatory update has the potential to significantly transform how British savers engage with cryptocurrencies, paving the way for one of Europe’s most substantial new investment channels.
(Photo by Ewan Kennedy)
See also: US SEC weighs tokenized stock trading on cryptocurrency exchanges
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