The United Kingdom’s top financial regulator has formally lifted a ban on digital asset exchange-traded notes (ETNs), citing an evolved market and a better understanding of the products.
The so-called ‘crypto exchange-traded notes’ (cETNs) are a purchasable debt instrument that is linked to the performance of some digital asset. Alongside ETFs, they serve as a way to gain exposure to digital assets without holding them directly.
cETNs were banned for retail traders at the beginning of 2021 by the U.K.’s Financial Conduct Authority (FCA), the country’s regulator for financial services and markets. At the time, the FCA cited a number of reasons for the ban, including:
- The inherent volatility of the underlying digital assets;
- Prevalence of market abuse and financial crime in secondary markets;
- Inadequate understanding of digital assets by retail; and
- ‘lack of legitimate investment need for retail customers to invest in these products’
The FCA originally revealed it was planning to remove the ban back in August, with it taking effect on October 8. At the time, David Geale was the executive director of payments and digital finance at the FCA. The ban’s removal was announced by the FCA, saying:
“Since we restricted retail access to cETNs, the market has evolved, and products have become more mainstream and better understood. In light of this, we’re providing consumers with more choice, while ensuring there are protections in place. This should mean people get the information they need to assess whether the level of risk is right for them.”
As of this week, the ban has been formally lifted and cETNs can be offered to retail investors in the United Kingdom.
Though the ban has been lifted, the products are still subject to the FCA’s rules around promoting financial products to retail. Additionally, the products are specifically excluded from the U.K.’s Financial Services Compensation Scheme, which protects investors in the event of company failure, fraud, or poor financial advice.
In any case, it marks a pivot for the regulator, reflecting broad shifts in attitudes toward the digital asset industry in the past 24 months.
However, not everyone has embraced the pivot. The day after the ban officially lifted, Hargreaves Lansdown, the U.K.’s biggest retail investment platform, doubled down on skepticism about the asset class, though it didn’t rule out offering digital assets on its platform.
“We do not think cryptocurrency has characteristics that mean it should be included in portfolios for growth or income and shouldn’t be relied upon to help clients meet their financial goals,” the company is reported as saying.
The firm also said it was planning to spend ‘the next couple of months’ assessing client needs and risk considerations in anticipation of potentially adding digital asset trading to its offering.
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The United Kingdom’s top financial regulator has formally lifted a ban on digital asset exchange-traded notes (ETNs), citing an evolved market and a better understanding of the products.
The so-called ‘crypto exchange-traded notes’ (cETNs) are a purchasable debt instrument that is linked to the performance of some digital asset. Alongside ETFs, they serve as a way to gain exposure to digital assets without holding them directly.
cETNs were banned for retail traders at the beginning of 2021 by the U.K.’s Financial Conduct Authority (FCA), the country’s regulator for financial services and markets. At the time, the FCA cited a number of reasons for the ban, including:
- The inherent volatility of the underlying digital assets;
- Prevalence of market abuse and financial crime in secondary markets;
- Inadequate understanding of digital assets by retail; and
- ‘lack of legitimate investment need for retail customers to invest in these products’
The FCA originally revealed it was planning to remove the ban back in August, with it taking effect on October 8. At the time, David Geale was the executive director of payments and digital finance at the FCA. The ban’s removal was announced by the FCA, saying:
“Since we restricted retail access to cETNs, the market has evolved, and products have become more mainstream and better understood. In light of this, we’re providing consumers with more choice, while ensuring there are protections in place. This should mean people get the information they need to assess whether the level of risk is right for them.”
As of this week, the ban has been formally lifted and cETNs can be offered to retail investors in the United Kingdom.
Though the ban has been lifted, the products are still subject to the FCA’s rules around promoting financial products to retail. Additionally, the products are specifically excluded from the U.K.’s Financial Services Compensation Scheme, which protects investors in the event of company failure, fraud, or poor financial advice.
In any case, it marks a pivot for the regulator, reflecting broad shifts in attitudes toward the digital asset industry in the past 24 months.
However, not everyone has embraced the pivot. The day after the ban officially lifted, Hargreaves Lansdown, the U.K.’s biggest retail investment platform, doubled down on skepticism about the asset class, though it didn’t rule out offering digital assets on its platform.
“We do not think cryptocurrency has characteristics that mean it should be included in portfolios for growth or income and shouldn’t be relied upon to help clients meet their financial goals,” the company is reported as saying.
The firm also said it was planning to spend ‘the next couple of months’ assessing client needs and risk considerations in anticipation of potentially adding digital asset trading to its offering.
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