U.K. Financial Conduct Authority expands cryptocurrency exchange-traded notes availability for retail investors.
The Financial Conduct Authority (FCA), the UK's financial regulator, has announced a significant development in its regulatory framework for cryptocurrencies. From October 8, 2025, retail consumers will be able to trade crypto exchange-traded notes (cETNs) on Recognised Investment Exchanges (RIEs) in the UK, subject to specific regulatory conditions.
This decision follows amendments made by the FCA, which lift the ban on retail sales of these products, provided they are admitted to FCA-approved UK RIEs and comply with regulatory safeguards. These include marketing restrictions, risk warnings, appropriateness testing, and adherence to the Conduct of Business Sourcebook (COBS) rules.
The cETNs are classified as Restricted Mass Market Investments (RMMIs), meaning firms must apply enhanced suitability and distribution controls tailored to the target retail market. The FCA's Consumer Duty will apply fully to firms offering these products, requiring them to act to deliver good consumer outcomes, avoid foreseeable harm, specify and design products for a suitable target market, and ensure distribution aligns with the product’s intended consumer profile.
Firms must present clear, fair, and not misleading information and avoid aggressive or inappropriate promotion, ensuring that retail investors understand the risks involved. It is crucial for consumers to comprehend the risks before investing in crypto products, as these investments can be volatile and complex.
However, it is important to note that crypto ETNs traded on UK exchanges will not be covered by the Financial Services Compensation Scheme (FSCS). This means that investors bear full risk without compensation guarantees if a provider fails or investments perform poorly.
The FCA will continue to monitor market developments and consider its approach to high-risk investments in the crypto market. The ban on retail access to cryptoasset derivatives remains in place. The FCA's aim is to protect consumers while fostering innovation in the crypto market.
In conclusion, retail consumers trading crypto ETNs on UK RIEs will be protected by various regulatory frameworks, including marketing restrictions, product design and distribution requirements under the Consumer Duty, and appropriateness tests. However, they will not have FSCS compensation protection, making risk disclosure and consumer understanding critical in these investments.
In light of the FCA's announcement, businesses dealing with crypto exchange-traded notes (cETNs) in the UK must adhere to the Conduct of Business Sourcebook (COBS) rules and follow various regulatory safeguards, including marketing restrictions, risk warnings, appropriateness testing, and compliance with the FCA's Consumer Duty. Despite the protection provided by these regulatory frameworks, retail investors must fully comprehend the risks associated with crypto investments, as they will not be covered by the Financial Services Compensation Scheme (FSCS).
