2024-03-15
The Financial Conduct Authority (FCA) in the UK has announced that it will allow the creation of crypto-backed exchange-traded notes (ETNs) on the condition that they are limited to professional investors only.
This decision has been welcomed by the crypto industry as it will make it easier to list crypto investment products. However, the exclusion of retail investors is seen as a limitation to broader crypto adoption.
ETNs are favored in the European Union and the UK due to regulatory restrictions on offering exchange-traded funds (ETFs) for single assets like Bitcoin or Ethereum. With the FCA's approval, traditional finance and UK traders may soon have easier access to crypto-tied financial products. However, industry experts believe that more needs to be done to make the market more accessible and to enfranchise more companies into UK markets.
The FCA's cautious approach to the crypto industry has been evident since it excluded retail investors from the sale of crypto-derivatives in 2020. The FCA has stated that its ban on offering crypto ETNs to retail consumers remains in place due to significant harms in the crypto market. However, it has also mentioned that its position on ETNs is under review.
Industry insiders hope that this review will bring meaningful changes to allow greater accessibility. The path to a UK ETN appears relatively painless compared to the approval process for spot Bitcoin ETFs in the United States.
However, experts believe that comprehensive regulations should be adopted to allow safe exposure to crypto assets and protect investors, rather than outright prohibitions. There is a need for further collaboration between the public and private sectors and policymakers to achieve this. Overall, the FCA's policy on crypto remains an unfinished projects.
