UK Regulator Softens Stance on Crypto—But Only for the Pros

• Retail access to crypto ETNs in the UK may return under strict exchange listing and risk disclosure rules.
• Crypto derivatives ban remains, with FCA citing ongoing risks like volatility and market abuse.

The United Kingdom Financial Conduct Authority (FCA) is considering easing its restrictions on crypto exchange-traded notes (ETNs) for retail investors. This signals a slight shift in the regulator’s approach to digital assets. However, the regulator stated that crypto derivatives will remain banned for individual investors. 

FCA Proposes Return of Crypto ETNs for Retail Investors

In an earlier update, we covered the FCA’s proposal to ban retail investors from using borrowed funds to purchase Bitcoin and other crypto assets due to rising consumer debt risks.

A recent news emerging now is that the Financial Conduct Authority (FCA) has announced plans to possibly lift the current ban on crypto exchange-traded notes (ETNs) for retail investors. 

This marks a notable change from its earlier stance taken in 2020. The regulator barred individual investors from accessing both crypto ETNs and derivatives. Crypto ETNs are investment products that mirror the performance of a cryptocurrency or a crypto index. 

Instead of buying the asset directly, investors lend money to the issuer of the ETN, who promises a return based on crypto market movements. This offers an indirect way for individuals to gain exposure to cryptocurrencies.

The FCA cited several concerns in its October 2020 announcement, including high volatility and unreliable valuation methods. It also included market abuse, cyber threats, and poor consumer understanding of crypto products. These factors led the regulator to conclude that such products were unsuitable for the average investor. The ban officially came into effect in January 2021.

On June 6, the FCA released a statement proposing to reverse part of that decision. It plans to allow retail investors access to crypto ETNs under strict conditions. The products must be listed on recognized investment exchanges, and firms must provide clear warnings about the risks involved. These risk disclosures would follow standards for direct crypto asset investments.

The FCA explained that this move is part of its continued work establishing a balanced and effective regulatory system for crypto markets. The goal of both is to protect investors and support innovation.

In line with current development, CNF highlighted in a previous article that the FCA plans to introduce a crypto market framework in 2026. These regulations will cover stablecoins, trading platforms, staking, and prudential exposure.

Retail Ban on Crypto Derivatives Will Remain

Meanwhile, the financial regulator is softening its position on ETNs. It has confirmed that its ban on crypto derivatives for retail investors will remain in place. Derivatives allow users to speculate on the price of cryptocurrencies without owning them.

The regulator stated that the risks, such as extreme price swings, fraud, and lack of transparency, still outweigh the potential benefits for individual investors.

The FCA has also introduced proposals to ease specific industry requirements, including streamlined reporting rules for fund value assessments. 

We also covered the UK government’s introduction of draft legislation to establish a comprehensive regulatory framework for cryptocurrency exchanges, dealers, and agents.

Meanwhile, CNF previously explored the UK’s new requirement that crypto firms report all user and transaction data to HMRC by January 2026.