UK FCA Lifts Retail Ban on Crypto ETNs, Allowing Trading on Approved Exchanges

Executive Summary

Effective October 8, 2025, the UK's Financial Conduct Authority (FCA) has reversed its 2021 prohibition on retail investor access to crypto Exchange-Traded Notes (ETNs). This regulatory adjustment permits the trading of these products on FCA-approved, UK-based investment exchanges. The decision marks a significant policy shift aimed at broadening access to digital asset investments, with the FCA citing a maturing market and improved infrastructure. Despite the lifting of the ban for ETNs, the FCA maintains its restrictions on retail access to crypto Exchange-Traded Funds (ETFs) and derivatives, emphasizing a cautious and phased regulatory approach.

The Event in Detail

In an August 1 notice, the FCA confirmed the lifting of its ban on crypto ETNs for retail investors. The previous ban, enacted in 2021, was based on concerns regarding market volatility, consumer protection, and the inherent risks associated with these products. The regulator now indicates that the market has evolved, demonstrating better infrastructure, increased transparency, and a more informed investing public. David Geale, the FCA's Executive Director of Payments and Digital Assets, stated that crypto investment products are more comprehensible, and the supporting infrastructure has advanced.

Crypto ETNs accessible to retail consumers must adhere to stringent conditions. They must be traded on an FCA-approved, UK-based investment exchange, such as the London Stock Exchange (LSE). The LSE's admission guidelines for Crypto ETNs specify that these products must be physically backed, non-leveraged, and have Bitcoin (BTC) or Ethereum (ETH) as their underlying crypto assets. The underlying assets must be wholly or principally held in cold storage by custodians subject to Anti-Money Laundering (AML) regulations in jurisdictions including the UK, EU, Jersey, Switzerland, or the United States. Furthermore, the market price of the underlying asset must be reliable and publicly available, sourced from a diverse range of pricing sources.

Crucially, these crypto ETNs will not be covered by the Financial Services Compensation Scheme (FSCS), meaning investors will not be eligible for reimbursement in the event of losses. Firms offering cETNs must comply with updated financial promotion rules, ensuring marketing materials are transparent and not misleading. The FCA will continue to restrict retail trading of crypto derivatives.

Market Implications

The lifting of the ban is expected to facilitate increased retail investment in crypto assets within the UK, potentially leading to moderate capital inflows and heightened trading activity for compliant ETN products. This move positions the UK as a more accommodating jurisdiction for digital assets, which could attract further crypto businesses and foster innovation within the Web3 ecosystem. Companies such as BlackRock, the world's largest asset management company, and Bitwise are reportedly preparing to offer crypto ETNs or related products in anticipation of this regulatory change.

This development may serve as a precursor for future regulatory considerations regarding crypto ETFs for retail investors, though the FCA has indicated that its framework requires further updating for such products. The cautious reintroduction of ETNs reflects a strategic balance between enabling investor access and maintaining regulatory oversight in a rapidly evolving market.

Expert Commentary

Industry participants have largely welcomed the FCA's decision. David Geale of the FCA emphasized that the decision provides consumers with more choice while ensuring protections are in place, allowing individuals to assess the suitability of such investments. Hunter Horsley, CEO of Bitwise, expressed enthusiasm, stating his company's excitement to serve more investors in the European market.

Ian Taylor, a board adviser to the digital assets trade association CryptoUK, remarked that the UK had been an outlier on ETNs and expressed hope that the move would improve consumer protections. CryptoUK views this as a positive step towards broader acceptance and anticipates continued advocacy for lifting the ban on highly-regulated derivative products for retail investors. The organization has consistently highlighted the importance of regulatory clarity for the UK to become a global hub for crypto assets.

Broader Context

The FCA's policy shift aligns with a global trend of increasing institutional and retail interest in regulated digital asset products. While the UK had maintained strict prohibitions since 2021, the regulator had already begun easing restrictions for professional and institutional investors by March 2024, acknowledging the rapid evolution of digital asset infrastructure and growing demand. This phased approach reflects a deliberate strategy to integrate crypto assets into mainstream finance under controlled conditions.

The initial ban was implemented due to concerns over extreme volatility, the lack of clear fundamental value for crypto assets, widespread investor misunderstanding of product risks, and the high potential for fraud and market manipulation. The current reversal indicates the FCA's assessment that market maturity, increased transparency, and improved understanding of risks mitigate some of these earlier concerns. The move reinforces the UK's ambition to become a leading hub for digital assets, while maintaining a commitment to consumer protection through strict listing requirements and continued exclusion of more complex products like derivatives and ETFs for retail investors.