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The UK's financial watchdog has ended its four year ban on the use of crypto-based exchange traded notes (ETNs) by retail investors in a move that could add 20% to the UK's crypto market
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This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.
The scrapping of the ban was announced earlier this year and is enacted from today. It has been welcomed by crypto vendors and investment platforms alike.
According to research from investment platform IG, the FCA’s rescinding of the ban coud lead to a surge in crypto-related investing from consumers.
‘With ETNs set to launch, we expect a surge in crypto adoption – especially among younger generations already comfortable with digital assets," Michael Healy, UK managing director at IG told This is Money. "This could mark the start of a new phase of mainstream crypto investing in the UK."
ETNs are debt instruments that track the performance of an underlying asset. There are currently 17 such instruments listed on UK exchanges which have been only available to institutional investors until now.
However, according to digital assets platform Zumo, retail investors should ensure they understand how the products work rather than investing solely on the strength of a marketing campaign.
"This is just the first step in the journey, and it is absolutely crucial that providers quickly think beyond the marketing to ensure they address any gaps in consumer understanding," said Nick Jones, Zumo founder and CEO.
Investors also need to understand what crypto products are still inaccessible under the FCA’s rules, according to Jones.
“Although certain cETNs will now be open to retail investors via UK-recognised investment exchanges, in reality the access is quite limited. Listing requirements mean investors will only be able to access a small subset of crypto ETN products that are UK listed, and we will still need to see the extent of broker pick-up. Meanwhile, the ban on retail access to crypto derivatives remains – and crypto ETFs of the US style remain impossible.”
According to Jones, it is a complex message for investors to unpack and there is an onus on providers in the market to ensure retial investors do not misjudge what they are investing in or where the risks like.
"The industry’s role is to now make that abundantly clear, without overselling the opportunity – and in doing so providers will start acting in the spirit of the Consumer Duty."
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