- Watchdog imposed ban in 2020 due to ‘inadequate understanding’ of crypto
Britain’s investors could soon be able buy bitcoin and crypto via low-cost ETF-style funds, under changes being considered by the financial watchdog.
The Financial Conduct Authority is proposing to lift an existing ban on offering crypto exchange-traded notes – or ETNs – to retail investors.
ETNs are similar to exchange traded funds, which many investors will be familiar with. Known as ETFs, these pool investors cash in a fund that is itself listed on the stock market, generally to track the price of a certain index of assets, ie the FTSE 100.
While ETNs also try to track an index, they are debt instruments that promise to replicate the index’s performance.
The FCA banned the sale of bitcoin and other crypto ETNs to UK retail investors alongside crypto derivatives in 2020, arguing they were not appropriate.
And while bitcoin ETFs have since launched in the US, ordinary investors in Britain are not allowed to buy them through UK investment platforms. They can, however, hold crypto direct with platforms but this is unregulated.
The FCA is considering opening up crypto funds to retail buyers via approved investment exchanges
At the time, the watchdog said bitcoin and rival crypto assets had ‘no reliable basis for valuation’, were vulnerable to market abuse, and showed ‘extreme volatility’.
It also argued retail investors had an ‘inadequate understanding of crypto assets’, and there was a lack of ‘legitimate investment need’ for the products.
But the regulator, which overturned the ban on crypto ETN sales to professional investors last year, said on Friday it was considering opening up market access to retail buyers, via approved investment exchanges.
Noting similar products ‘are already available in other countries’, it launched a consultation on overturning the ban as part of efforts to establish a regulatory framework for crypto.
Under FCA proposals, the ban on crypto derivatives would remain in place while promoters of crypto ETNs would face financial promotion rules and an obligation to inform buyers of potential risks.
They will not be allowed to offer ‘inappropriate incentives to invest’.
David Geale, executive director of payments and digital assets at the FCA, said: ‘This consultation demonstrates our commitment to supporting the growth and competitiveness of the UK’s crypto industry.
‘We want to rebalance our approach to risk and lifting the ban would allow people to make the choice on whether such a high-risk investment is right for them given they could lose all their money.’
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