Summary:
The Financial Conduct Authority (FCA) will lift its ban on cryptocurrency exchange-traded notes (ETNs) for UK retail investors on 8 October 2024. This regulatory shift allows everyday investors to access crypto exposure through regulated financial products rather than direct holdings. Major platforms like Fidelity, FreeTrade, and Interactive Investor plan to offer these ETNs, though some providers remain cautious due to volatility risks and Consumer Duty compliance. The move aligns with growing retail demand for crypto as an alternative asset class, despite ongoing debates about its intrinsic value and suitability for mainstream portfolios.
What This Means for You:
- Expanded Investment Options: Crypto ETNs provide a regulated way to gain crypto exposure without managing private wallets or exchange accounts.
- Tax Efficiency Potential: Pending HMRC confirmation, these products may be ISA-eligible, offering capital gains tax advantages over direct crypto purchases.
- Risk Management Required: Allocate only a small percentage of your portfolio (experts suggest 1-5%) given crypto’s extreme volatility and lack of FSCS protection.
- Platform-Specific Availability: Research your brokerage’s ETN rollout timeline, as adoption varies (e.g., Fidelity offers immediate access, while eToro awaits demand).
Original Post:
The Financial Conduct Authority (FCA) will lift the ban on the sale of cryptocurrency (crypto) exchange-traded notes (ETNs) to retail investors on 8 October.
Retail investors are increasingly interested in crypto, but unless they want to open a wallet on a crypto exchange and hold cryptocurrencies directly, they are often forced into some form of proxy exposure. That has, in the past, crypto stocks like Strategy (NASDAQ:MSTR) (formerly MicroStrategy) become top stock picks for DIY investors.
“Crypto ETNs open the door to more choice and diversification for UK investors,” said Alex Campbell, head of communications at FreeTrade. “They turn crypto from a fringe trade into a regulated tool for building resilient portfolios. The UK still lags other major markets in its crypto regulations but this change marks a welcome step forward.”
“Digital assets continue to grow in popularity and are increasingly seen as a part of the financial lives of consumers,” said John Dobson, head of investment solutions at Interactive Investor.
According to WisdomTree research, investors are considering crypto to help boost pension pots, fund a property deposit or even pay for a holiday.
The FCA has made it clear that Consumer Duty rules will apply to firms that are offering crypto ETNs. This means any platforms selling them to retail investors are obliged to ensure the products meet the needs, characteristics and objectives of their customers, and provide sufficient information to customers so they can make an informed decision.
That appears to have given some platforms pause for thought. While some platforms have told MoneyWeek they intend to offer crypto ETNs to their customers soon after the ban is lifted, others are taking a more measured approach – while some have no plans to offer the products at all.
The ban on the sale of crypto ETNs to retail investors has been in place for almost five years, since 6 January 2021. During that time, the price of Bitcoin has increased by over 250%.
Platform Adoption Timeline
These investment platforms told MoneyWeek they intend to offer crypto ETNs to their users as soon as they are able to:
- Fidelity Adviser Solutions (advised clients only)
- FreeTrade
- Stratiphy
Platforms with planned future offerings:
- Fidelity Personal Investing
- IG
- Interactive Investor
Hargreaves Lansdown, AJ Bell, and eToro are evaluating demand, while Moneybox and BestInvest currently have no plans to offer crypto ETNs.
ISA Eligibility & Tax Implications
HMRC will confirm by 8 October whether crypto ETNs can be held in ISAs for tax-free growth. Unlike direct crypto holdings, ETNs may qualify as regulated financial instruments eligible for stocks and shares ISAs.
Risk Considerations
Crypto ETNs carry unique risks including:
- No FSCS protection against losses
- Underlying asset volatility (Bitcoin’s 30-day volatility often exceeds 80%)
- Counterparty risk from ETN issuers
“It’s imperative that retail investors do their research and understand the risks before allocating any part of their portfolio to digital assets,” cautioned Dobson.
Extra Information:
FCA’s official statement details regulatory requirements for crypto ETN providers.
Hargreaves Lansdown’s ETN guide explains how these instruments differ from ETFs.
Interactive Investor’s volatility analysis provides context for risk assessment.
People Also Ask About:
- How do crypto ETNs differ from owning cryptocurrency directly? ETNs track crypto prices without requiring wallet management, but you don’t own the underlying asset.
- What fees are associated with crypto ETNs? Expect 1-2% annual management fees plus platform trading charges.
- Can crypto ETNs be held in SIPPs? Currently no – pension rules remain stricter than ISA regulations.
- Which cryptocurrencies will ETNs track? Initial offerings will focus on Bitcoin and Ethereum, with altcoin ETNs likely to follow.
Expert Opinion:
“While crypto ETNs democratize access, they don’t eliminate the fundamental risks of cryptocurrency investing,” notes Dr. Sarah Coles, Head of Personal Finance at Hargreaves Lansdown. “The FCA’s approval reflects market demand rather than an endorsement of crypto as a stable asset class – investors should treat these as speculative satellite holdings, not portfolio cornerstones.”
Key Terms:
- FCA-regulated crypto investment products
- UK cryptocurrency ETN tax treatment
- Best platforms for crypto exchange-traded notes
- Risks of Bitcoin ETNs vs direct ownership
- How Consumer Duty rules affect crypto investments
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