UK digital asset market poised for 20% growth as FCA lifts four-year retail ban on crypto ETNs, IG says

The Financial Conduct Authority, the UK's financial regulator, officially lifted its four-year retail ban on crypto exchange-traded notes on Wednesday, expanding availability beyond professional investors for the first time.

The move aligns the UK with countries such as the U.S., Canada, Hong Kong, and across the EU by enabling individuals to access crypto investment products, provided they are traded on an FCA-approved investment exchange.

"Allowing retail investors to gain exposure through UK-recognised exchanges keeps this activity within the regulatory perimeter, rather than pushing consumers offshore to less regulated environments," Elliptic Head of EMEA Policy and Regulatory Affairs, Mark Aruliah, told The Block. "But momentum matters — other regions such as the U.S. and Singapore continue to move at speed, and the UK must maintain that pace to remain competitive."

The end of the restriction follows a consultation process carried out earlier this year, with the FCA initially proposing to lift the ban on crypto ETNs for retail investors in June. "Since we restricted retail access to cETNs, the market has evolved, and products have become more mainstream and better understood," FCA Executive Director of Payments and Digital Finance David Geale explained when discussing the decision in August.

However, such products are yet to be listed on the London Stock Exchange, meaning retail investors still cannot buy them, and the ban on crypto asset derivatives for retail remains in place, though the regulator had said it will continue to monitor market developments and review its approach to high-risk investments.

“Today’s decision will not have been taken lightly but rather recognises that crypto ETNs are the safest and most sensible route to investing in crypto," Brett Hillis, partner and crypto regulation expert at international law firm Reed Smith, told The Block. "Looking ahead, I just can't see the FCA allowing retail access to crypto derivatives. These are complex products and, whatever its secondary objectives, the FCA takes its responsibility to consumers incredibly seriously, so I think these restrictions will remain in place for the foreseeable."

Unlike U.S. spot crypto ETFs, ETNs do not necessarily hold underlying assets directly. Instead, they are debt securities issued by financial institutions that promise to pay the holder a return tracking an asset's performance minus fees and expenses.

Firms offering these products to retail investors must comply with the Consumer Duty, which requires them to deliver good outcomes for customers. However, the products won't be covered by the Financial Services Compensation Scheme, which protects consumers when firms fail.

UK crypto market poised for 20% growth

The UK crypto market could expand by up to 20% following the launch of crypto ETNs for retail investors, according to new research from IG Group. The UK-listed investment and trading giant's survey found that 30% of UK adults would consider investing in crypto via ETNs — a sharp rise from current ownership levels of 12% estimated by the FCA.

"I think we can expect the removal of restrictions to give the crypto market a boost. Indeed, crypto sales have reportedly increased already and, alongside other wider market reforms, reflect a drive to introduce more dynamism into the UK economy," Reed Smith's Hillis noted. "This is a big moment in the UK's push to become a crypto hub. On the face of it, the UK is just catching up with the rest of the world by allowing retail access to crypto ETNs. In practice, however, the extent of the positive market reaction so far would suggest that this could help the UK make up lost ground in the ongoing crypto race."

Interest is strongest among younger investors, with around half of 18 to 34-year-olds expressing intent, according to IG. Safety, regulation, and the ability to hold ETNs within ISAs and pensions were cited as key draws, with more than twice as many respondents supporting as opposing the inclusion of crypto in tax-efficient wrappers.

"Crypto ETNs represent a significant step forward for the UK market, opening access to millions of investors who have previously been cautious or excluded. The ability to hold crypto within familiar, tax-efficient vehicles like ISAs and pensions is a real milestone," Michael Healy, UK Managing Director at IG, said in a statement shared with The Block. 

"With ETNs set to launch next month, we expect a surge in crypto adoption — especially among younger generations already comfortable with digital assets. This could mark the start of a new phase of mainstream crypto investing in the UK," he added.

How we got here

Since January 2021, the FCA has prohibited the sale, marketing, and distribution of crypto derivatives and crypto ETNs to retail consumers, applying to all UK-regulated platforms and brokers. In March 2024, the FCA updated its position to allow recognized investment exchanges to list crypto asset-backed ETNs for professional investors only, restricted to entities such as investment firms and credit institutions, with stringent controls to ensure orderly trading and investor protection.

The first UK-listed crypto ETNs from 21Shares, WisdomTree, and Invesco — backed by bitcoin and ether — subsequently launched on the London Stock Exchange in May 2024 but saw limited volumes compared to their U.S. ETF counterparts. Opening these products to retail investors would be a "game changer," 21Shares UK Head Alex Pollak said at the time.

"The lifting of the ban on Bitcoin and Ethereum-backed ETNs is a great first step, allowing retail investors to get exposure to the two biggest cryptoassets in the most simple and secure way," 21Shares CEO Russell Barlow told The Block on Wednesday. "However, there is still some way to go until crypto assets across the board are accepted as part of the financial system."

The UK has adopted a phased approach to crypto regulation, aiming to position itself as a global hub for digital assets while prioritizing consumer protection and financial stability. Comprehensive regulations covering stablecoins, trading platforms, lending, staking, and custody are also currently under consultation as part of the FCA's crypto roadmap, with full implementation expected in 2026.

"ETNs are just one part of the puzzle," IG's Healy said. "To fully unlock crypto's potential, the UK needs a proper regulatory framework — and it needs it fast, or we risk falling far behind global peers. It's also crucial that the government considers allowing crypto ETFs, which are currently banned in the UK but offer greater flexibility and liquidity."

“This is not the end of the road by any means," Reed Smith's Hillis added. "Faced with competition from abroad, the UK needs to roll out its regulatory regime. Just across the channel, for instance, is the EU’s MiCA, which presents firms with a comprehensive regulatory regime across a larger market than the UK. The urgency is underscored by the falling number of crypto firm applications to the FCA with good reason to believe this fall is being driven by firms hitting pause in the UK to prioritise alternate jurisdictions. The UK has real pent-up potential and with the right regulation this can be unleashed, but we can't wait forever."

The FCA did not respond to The Block’s request for comment by publication.