The London Stock Exchange has recently made an announcement that they will start accepting applications for bitcoin and ether exchange-traded notes (ETNs) in the second quarter of 2024. However, while this news may seem like progress, the Financial Conduct Authority (FCA) has stated that the approval of these products for UK retail investors is still highly unlikely. This discrepancy between the LSE and the FCA has raised concerns about the future of crypto ETNs in the UK.
The FCA first imposed a ban on the sale of derivatives and ETNs related to cryptocurrencies back in October 2020, which came into effect in January 2021. The regulatory body argued that these products were “ill-suited” for retail consumers due to the potential risks they pose. Despite pressure from various groups to lift the ban, the FCA has remained steadfast in its position, citing concerns about the volatility and unpredictability of crypto investments.
Industry Perspective
While some in the industry, such as Coinshares head of asset management Frank Spiteri, view the acceptance of crypto ETN applications as a positive step, others, like crypto expert Laurent Kssis, are more critical of the FCA’s reluctance to approve these products for retail investors. Kssis highlights the fact that while crypto ETPs are thriving in Europe, the UK has fallen behind in providing regulated access to digital assets for its residents.
The Landscape of Crypto Investments in the UK
It’s worth noting that retail investors in the UK were able to access crypto ETPs through platforms like Hargreaves Lansdown as early as 2017. However, the ban on these products has limited the options available to UK investors, forcing them to use unregulated exchanges to invest in cryptocurrencies. This has created a disparity between the UK and other regions like the US and Europe, where crypto ETPs are widely available.
In 2022, the UK government announced plans to recognize stablecoins as a valid form of payment in an effort to position the country as a global hub for crypto asset technology and investment. Despite these ambitions, the lack of approval for crypto ETPs in the UK raises questions about the government’s commitment to fostering innovation in the crypto space. Industry experts like Kssis are skeptical of the UK’s claim to be a hub for everything crypto, blockchain, and Web3 without providing retail investors with access to regulated crypto products.
The future of crypto ETNs in the UK remains uncertain. While the acceptance of applications by the LSE may signal some progress, the FCA’s reluctance to approve these products for retail investors creates a challenging environment for crypto market participants. As the landscape of crypto investments continues to evolve, it is crucial for regulators and industry stakeholders to collaborate in order to ensure that investors have access to safe and regulated opportunities to engage with digital assets.
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