UK FCA to allow retail investors to buy Bitcoin and crypto ETNs

The Financial Conduct Authority (FCA), the UK’s top financial regulator, is set to open the door for retail investors to access crypto exchange-traded notes (cETNs) after more than three years of restricting such products over concerns about consumer risk and market volatility, according to a Friday press release.

David Geale, executive director of payments and digital finance at the FCA, said in a statement that the regulator is responding to positive developments in the crypto market.

“Since we restricted retail access to cETNs, the market has evolved, and products have become more mainstream and better understood,” said Geale. “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 new rules require cETNs to be traded on FCA-approved UK-based investment exchanges, known as Recognised Investment Exchanges (RIE). Financial promotion rules will govern these products to ensure consumers receive appropriate information and are not offered unsuitable investment incentives.

While firms offering these products to retail investors must comply with the Consumer Duty requirements, investments will not be covered by the Financial Services Compensation Scheme (FSCS).

The regulatory update follows the FCA’s March 2024 decision to allow recognized investment exchanges to create UK-listed market segments for cETNs targeting professional investors. The agency maintains its ban on retail access to crypto derivatives and will continue to monitor market developments.

The change represents the latest development in the FCA’s ongoing efforts to establish a regulatory framework for crypto assets, following its recently published proposals on stablecoins and other aspects of the regime.