Key Highlights:
- Retail access to Bitcoin ETNs is set to restart on October 8 via FCA-approved exchanges and strict promotional guidelines.
- Industry experts suggest that the lifting of the ETN ban may alter UK investor behavior and lessen dependence on Bitcoin proxies like the US-based “Strategy” (MSTR).
After a four-year hiatus, Bitcoin exchange-traded notes (ETNs) will make a return to London, a shift that could be more crucial than previously thought. Starting on October 8, cryptocurrency ETN products will once again be accessible to retail investors following a ban imposed by the Financial Conduct Authority (FCA) back in January 2021.
The FCA had argued that the extreme volatility, risk of fraud, and difficulties in valuation made such products too risky for general investors.
The previous ban left the UK trailing behind as other markets advanced. Spot ETFs in the US have seen over $65 billion in inflows since their debut earlier last year, while European investors have access to a wide variety of exchange-traded products. Consequently, UK investors often turned to international investments for crypto exposure, particularly stock from Strategy (MSTR).
Charlie Morris, founder of ByteTree, remarked that the significance of Bitcoin exchange-traded notes making a comeback in London is often undervalued. “London is the second-largest financial center globally, and many funds have interactions with London—be it through custody, trading, legal, or settlement.”
This regulatory change, which opens Bitcoin up to a broader fund market, implies legal clarity for institutional investors. Morris stated, “This could be just as impactful as the launches in the USA and potentially more so as time progresses. Sustained demand in Bitcoin will be supported for years by ETNs.”
The lifting of the ban signals a recalibration for Britain, aiming to reestablish itself as a competitive player in the cryptocurrency space, especially following initiatives led by former Chancellor Rishi Sunak and firms such as Jersey-based CoinShares. Industry voices, including former Chancellor George Osborne, who is now advising Coinbase, have cautioned that without embracing innovation, London risks losing its position in the finance sector.
Despite this positive shift, Peter Lane, the CEO of Jacobi Asset Management, noted that the intricate nature of the UK investment advice industry may lead to a gradual adoption of these products. He explained that the UK’s advice network is highly fragmented, so legal validation alone won’t guarantee that these ETNs will be readily presented to clients.
“The UK advisory network is quite split, with independent financial advisors and restricted and tied advisers operating under various models,” Lane clarified. “It will be necessary for firms across these sectors to assess this new opportunity carefully and implement due diligence processes before making these products available to clients.”
UPDATE (Aug. 20, 07:48 UTC): Adds broader details about the unbanning of crypto ETNs in the second paragraph.
