The recent announcement by the London Stock Exchange to begin accepting applications for bitcoin and ether exchange-traded notes (ETNs) in the second quarter of 2024 has brought attention to the state of crypto investments in the UK. However, despite this move, the Financial Conduct Authority (FCA) approving these products for UK retail investors remains unlikely, according to European product providers.
The FCA’s decision not to object to requests from “Recognized Investment Exchanges” to create a UK-listed market segment for crypto asset-backed ETNs comes after facing pressure from various groups questioning the ban that is currently in place. The FCA initially implemented a ban on the sale of derivatives and ETNs back in October 2020, citing concerns about the potential harm these products pose to retail consumers.
While the acceptance of applications for crypto ETNs by the London Stock Exchange is seen as a positive step by some, including crypto asset management firm Coinshares head of asset management Frank Spiteri, the FCA’s position on these products remains firm. The disparity between the UK’s approach and that of other European countries and the US is highlighted by Spiteri, who notes that UK residents are limited to unregulated exchanges for crypto investments.
Despite the progress made in terms of accepting applications for crypto ETNs, the road to approval for UK retail investors seems uncertain, given the FCA’s cautious stance on crypto investments. Crypto expert Laurent Kssis points out the challenges faced by lobbying groups in convincing the FCA to lift the ban on crypto ETPs, especially when these products are thriving in other regions.
Looking back to 2017, retail investors in the UK had access to crypto ETPs through platforms like Hargreaves Lansdown. However, the ban imposed by the FCA in 2020 changed the landscape for crypto investments in the UK, leaving investors with limited options for accessing digital assets. The recent announcement by the London Stock Exchange has sparked conversations about the future of crypto investments in the UK.
The UK as a Crypto Hub?
While the UK government has expressed ambitions to become a global hub for crypto asset technology and investment, the current regulatory environment poses challenges for crypto ETP issuers. Questions raised by experts like Kssis about the readiness of the UK to embrace crypto investments compared to other European countries indicate a need for regulatory clarity and alignment with global trends.
The acceptance of crypto ETN applications by the London Stock Exchange is a step in the right direction for the UK’s crypto investment landscape. However, the challenges posed by the FCA’s stance on these products and the broader regulatory environment highlight the complexities involved in integrating digital assets into traditional investment frameworks. The future of crypto ETNs in the UK remains uncertain, with industry experts and investors closely watching for developments in regulatory policies and market dynamics.