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Regulatory changes that give UK retail investors greater access to cryptocurrencies have been hailed a “pivotal moment” for the market by industry figures.
The Financial Conduct Authority’s decision last week to lift the ban on offering crypto exchange traded products to retail investors has even been likened to the modernising “Big Bang” reforms of the 1980s.
“This is extremely significant and in some ways it could be seen as the first step in a seismic shift in UK financial markets in terms of the acceptance and adoption of digital assets more generally,” said Russell Barlow, chief executive of 21Shares, an issuer of cryptocurrency exchange traded products.
“It’s perhaps as important as the Big Bang in 1986. That was an attempt to modernise the City of London and make the UK globally competitive,” he added.
Dovile Silenskyte, director, digital assets research at WisdomTree, said the end of the UK’s retail ban “marks a pivotal moment in the broader integration of digital assets into the financial system”.
The FCA’s move means UK retail investors will from October 8 be able to buy popular bitcoin and ether digital tokens via regulated, exchange listed products, rather than using crypto exchanges, which are not recognised by the regulator.
Exchange traded notes (ETNs) track an underlying index and are listed and traded on an exchange. In most respects they function the same way as exchange traded funds.
The regulator has long taken a hardline stance against crypto investment in an attempt to shield investors from volatility and fraud. In March 2024, it finally gave the green light for crypto ETNs to list on the London Stock Exchange, but initially limited access to institutional investors.
At the time it said it “continued to believe that crypto ETNs and crypto derivatives are ill-suited for retail consumers due to the harm they pose”, adding that as crypto assets are “high risk and largely unregulated, those who invest should be prepared to lose all their money”.
“Since we restricted retail access to crypto ETNs, the market has evolved, and products have become more mainstream and better understood,” said David Geale, executive director of payments and digital finance at the FCA. “In light of this, we’re providing consumers with more choice.”
The FCA’s action comes years after investors in the US and continental Europe were given access to similar products. The US market in crypto exchange traded funds has surged to $180bn, according to VettaFi data.
About 12 per cent of British adults own, or have owned cryptocurrencies, the Treasury said this year.
Retail investors will now be able to buy one of 17 crypto exchange traded notes listed on the London Stock Exchange.
These have been issued by asset managers such as Fidelity, Invesco, WisdomTree and Global X, as well as crypto specialists such as 21Shares, Bitwise and CoinShares.
More launches are expected. VanEck, a US investment manager, told the Financial Times it is “in discussion with the relevant parties in the UK” to seek approval for its ETN.
Major investment platforms are also likely to incorporate crypto ETNs, with investment platform AJ Bell saying “it’s probable we will offer access to customers, subject to an appropriateness test”. InvestEngine, a digital investment platform, said it was “actively assessing these changes”.
All of the London-listed ETNs only provide exposure to bitcoin or ether among the vast numbers of digital currencies. This leaves the UK still a long way behind continental Europe, which boasts 249 digital asset exchange traded products, according to ETFbook, a data provider. These offer a wide array of cryptocurrencies, including leveraged products.
The latter will remain out of bounds in the UK, with the FCA saying its ban on cryptoasset derivatives will remain in place.
Barlow, who previously ran asset manager Aberdeen’s multi-asset business and who believes an investor with a “moderate” risk tolerance should have about 5 per cent of their portfolio in crypto, hopes the FCA will introduce a framework for approving ETNs tracking other digital assets.
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