UK Regulator OKs Crypto ETN Sales to Retail Investors

• The UKs FCA has reversed its policy to allow retail investors to buy crypto ETNs.
• These products must be traded on a Recognized Investment Exchange to be accessible.
• The FCA stresses these are high-risk investments subject to strict promotion rules.

In a significant policy reversal, the UKs top financial regulator is now opening the door for retail investors to buy and sell crypto exchange-traded notes (cETNs). The move from the Financial Conduct Authority (FCA) lifts a long-standing ban that had restricted these high-risk products to professional investors.

The new rule stipulates that everyday investors can access cETNs, provided they are traded on a Recognized Investment Exchange (RIE). According to David Geale, the FCAs director of digital assets, the decision is about “rebalancing risk management.” While he stressed these products carry the risk of total loss, he said the regulator believes investors should now have the freedom to make that choice for themselves.

A Calculated Risk with Clear Boundaries

This policy shift comes as regulators worldwide grapple with establishing clear rules for the crypto industry. However, the FCA drew a firm line in the sand, confirming that the existing ban on crypto-asset derivatives for retail customers will remain squarely in place.

Related:UK Rules Out National Digital Asset Reserve, Focuses on Blockchain Innovation

Existing financial promotion rules will cover cETNs, guaranteeing that investors are adequately informed about risks. The FCA aims to prevent inappropriate incentives for retail investors, treating cETNs with the same caution as direct crypto asset purchases. This policy is intended to help protect consumers, encourage innovation, and increase opportunities in the UKs cryptocurrency sector.

A Two-Pronged Strategy: Access and Enforcement

Alongside expanding retail access to cETNs, the FCA recently intensified its crackdown on unauthorized crypto promotions. Under new powers from the UKs Online Safety Act, the regulator has targeted “finfluencers” who promote risky investments on social media. This enforcement led to three arrests and over 650 removal requests for fraudulent content online.

Related: UKs FCA Plans to Block Borrowed Funds for Crypto Purchases

Steve Smart, one of the FCAs two top executives in charge of enforcement, noted that those with financial influence must act responsibly and only promote authorized products. The crackdown aims to lower risks for individuals with low tolerance for high-risk crypto investments. By combining market access reforms with stricter policing of online financial promotions, the FCA is working to create a safer environment for UK investors.