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The financial regulator of the UK will permit recognized exchanges to introduce crypto asset exchange-traded notes (cETNs).
Access to these products will be restricted to professional investors, such as investment firms and authorized credit institutions, as stated by the Financial Conduct Authority on Monday.
However, exchanges must implement controls to ensure smooth trading operations and safeguard professional investors. Additionally, the cETNs are required to comply with all stipulations of the UK Listing Regime regarding prospectuses and disclosures.
The regulator’s choice to permit cETN applications comes in the wake of US approval for Spot Bitcoin exchange-traded funds (ETFs), which has resulted in notable success and an increase in Bitcoin prices.
On the same day, the London Stock Exchange announced it would begin accepting applications for Bitcoin and Ethereum ETNs in the second quarter of 2024.
UK’s Cautionary Stance on Retail Access to Crypto Products
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The nation has shown hesitance in granting retail access to these products, making it somewhat isolated in comparison to other significant global markets.
In 2020, the FCA prohibited UK firms from offering or selling crypto derivatives and ETNs due to concerns such as market volatility. It asserts that these products pose considerable risks for retail consumers, potentially leading to harm. As a result, their sale remains banned.
“The FCA continues to remind individuals that cryptoassets are high risk and largely unregulated. Those who invest should be ready to lose all their money,” the regulator cautioned.
Evolving Crypto Regulatory Framework
In its regulatory approach to crypto, the UK has adopted a dual strategy.
In October, the Treasury revealed extensive proposals aimed at regulating fiat-backed stablecoins, with a particular emphasis on their application in payment systems.
This initial measure marks the commencement of their regulatory agenda, with plans to broaden regulatory oversight to encompass the wider cryptocurrency sector, which will be elaborated in separate policy documents.
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