UK to Lift Ban on Crypto ETNs to Emulate the US

The United Kingdom is planning to remove a long-standing ban on a specific type of crypto-linked investment product, aiming to close the gap with the U.S. and other financial centers in the race to become a major player in the digital asset space.

The Financial Conduct Authority (FCA), the country’s top financial regulator, released a proposal that would allow retail investors to buy cryptocurrency exchange-traded notes (ETNs) again. These investment products are tied to the performance of cryptos and provide a way for individuals to gain exposure to digital assets through regulated trading platforms.

Crypto ETNs have been off-limits to retail investors in the U.K. since 2019 when the FCA imposed a ban due to concerns about the risks they might pose to the average consumer. At the time, the regulator argued that the highly volatile nature of crypto assets could lead to serious financial losses.

Now, the FCA says it’s reconsidering its stance to help grow the U.K.’s digital finance sector. The ban on crypto derivatives, however, will stay in place for now.

David Geale, the FCA’s executive director overseeing digital assets and payment systems, stated that this move reflects the regulator’s intent to boost innovation and competitiveness in the U.K.’s crypto industry. He stated that giving retail investors access to these products allows them to decide whether the high-risk nature of such investments aligns with their financial goals while understanding they could potentially lose all of their money.

Industry players have welcomed the proposal as a positive step forward. Many believe the U.K. has been trailing behind countries like the U.S. and members of the European Union in setting up a strong, supportive framework for cryptocurrency markets.

In the U.S., spot crypto ETFs began rolling out after the SEC greenlit rule changes to permit bitcoin-based funds in early 2024. Meanwhile, the U.K. has been drafting new laws aimed at turning the country into a global leader in digital finance. The FCA is also actively engaged in developing a full regulatory system for cryptocurrencies, with plans to finalize it by 2026.

CryptoUK board advisor Ian Taylor noted that the U.K. has been out of step with international peers regarding ETNs and expressed hope that this change would enhance investor protections. Kraken’s U.K. head, Bivu Das, called the proposal a “turning point,” saying it signals that the market has matured and that previous restrictions are no longer justified. He added that regulatory changes like this are crucial for the U.K. to remain competitive on the global crypto stage.

Major crypto firms like Coinbase Global Inc. (NASDAQ: COIN) will be pleased that countries that had banned a variety of crypto-related trading activities are beginning to reopen their markets after recognizing the potential of the industry to increase the investment options available to the public.

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