UK FCA Greenlights Retail Crypto ETNs—But Keeps Derivatives Ban in Place

The UK's Financial Conduct Authority just handed crypto investors a win—with strings attached. Retail traders can now access crypto exchange-traded notes (ETNs), while derivatives get left in the regulatory dust.

Here's the kicker: The FCA still thinks you're too reckless to trade crypto derivatives. But hey—baby steps toward mainstream adoption, right?

One cynical take? The FCA's playing both sides—giving just enough access to claim 'innovation' while keeping its traditional finance overlords comfortable. Classic regulator move.

• Retail investors in the UK can trade crypto ETNs on FCA-approved exchanges from October 8.
• Firms must follow FCA consumer protection rules, but FSCS coverage will not apply to cETNs.
• Crypto derivatives remain banned for UK retail investors despite the new ETN trading access.

The United Kingdom’s Financial Conduct Authority (FCA) has lifted its retail ban on cryptocurrency exchange-traded notes (cETNs). According to the FCA, exchanges in the UK will be able to offer crypto ETNs to retail consumers starting October 8.

The FCA’s regulatory change comes more than three years after the regulator restricted the sales, marketing, and distribution of crypto ETNs and derivatives to retail customers since January 2021. According to the announcement, cETN markets have matured with the products becoming more mainstream and better recognized. 

David Geale, FCA executive director of payments and digital finance, said, “Since we restricted retail access to cETNs, the market has evolved, and products have become more mainstream and better understood.”

Notably, crypto ETNs differ from ETFs because they do not hold underlying assets. Instead, they are debt securities that track the performance of cryptocurrencies such as Bitcoin or Ethereum, with returns dependent on the issuer rather than direct asset ownership.

FCA Permits Retail Access to Crypto ETNs Under New Conditions

Under the new framework, crypto ETNs available to retail clients must be traded only on recognized investment exchanges in the UK that meet FCA standards. Providers are required to follow financial promotion rules, which restrict misleading marketing and require clear disclosure of risks and product structure.

David Geale also noted that consumers now have more choices but must be informed of the risks. “We’re providing consumers with more choice, while ensuring there are protections in place,” the director said.

No FSCS Protection and Derivatives Ban Remains

Firms offering crypto ETNs to the public are required to comply with the FCA’s Consumer Duty, which requires companies to support good customer outcomes. However, the FCA said that these products are not protected under the Financial Services Compensation Scheme (FSCS). Consequently, an investor cannot seek compensation if a provider collapses or a product fails.

The regulator added that the ban on retail access to crypto derivatives remains unchanged. Retail investors will continue to be prohibited from purchasing crypto futures, options, and other derivatives, as there are still concerns of risk and market volatility.

Moreover, the regulator also confirmed that UK investors remain unable to access offshore crypto products, including US-listed crypto ETFs. 

UK Builds Broader Crypto Regulatory Roadmap

Other crypto regulations are underway in the UK and new laws should be enacted by 2026 that focus on stablecoins, exchanges, lending and custody. The regulator is also seeking feedback on these developments as it develops a full-scale framework on digital assets. 

Earlier in March 2024, the FCA permitted UK-listed crypto exchange-traded notes (ETNs) to be listed among professional investors only. In addition, 21Shares, Invesco, and WisdomTree are among the first firms that listed bitcoin and ether-backed exchange-traded notes (ETNs) on the London Stock Exchange earlier this year. Nevertheless, the trading was minimal due to retail ban.

Furthermore, the FCA noted that consumers should understand all the risks before investing in cETNs, as they are complex and may be volatile.