UK lifts ban on crypto ETNs today

Core Points - The UK's Financial Conduct Authority (FCA) has lifted the ban on cryptoasset exchange-traded notes (cETNs) as of October 8, allowing these products to trade on FCA-approved Recognised Investment Exchanges like the London Stock Exchange [1] - The FCA's decision is based on the view that the crypto market has become more mainstream and better understood, providing customers with more choice while maintaining consumer protections [2] - Despite the lifting of the ban on cETNs, the FCA has clarified that the restriction on crypto derivatives, such as futures and options, remains in effect [5] Product Structure - In the UK and Europe, crypto products will be structured as Exchange-Traded Notes (ETNs), which are debt instruments issued by financial institutions, differing from Exchange-Traded Funds (ETFs) that hold the underlying asset [4] - ETNs will have a 1:1 backing by the asset but will operate similarly to bonds within the legal framework [4] - In contrast, U.S. crypto products, such as spot Bitcoin funds, are typically structured as ETFs, which are regulated funds that hold the asset in custody [3] Regulatory Context - The FCA has implemented strict financial promotion and Consumer Duty rules for cETNs, ensuring that investors are aware of the risks involved, as these products will not be insured by the Financial Services Compensation Scheme (FSCS) [2] - The FCA is also advancing its broader crypto regulatory framework, which includes proposals for stablecoins and other digital asset laws, while continuing to monitor high-risk transactions in the market [5]