UK crypto ETN providers call for reevaluation of retail investors ban

The UK’s Financial Conduct Authority (FCA) is loosening up a bit on its previously iron-clad stance against crypto. The word on the street is that London might soon see a flurry of cryptocurrency exchange-traded products (ETPs) making their grand entrance. But before we pop the champagne, there’s a catch – these shiny new investment vehicles are off-limits to the average Joe and Jane. Only the big players, the so-called “professional investors,” get to play in this sandbox.

While this move places the UK a smidge closer to the global trend of embracing crypto ETPs, seen in places like continental Europe, Australia, Brazil, Canada, and the United States, it’s not without its critics. Many industry insiders are scratching their heads, wondering why the FCA insists on keeping retail investors out in the cold.

The Big Crypto Debate

At the heart of this debate is the FCA’s recent nod of approval to the London Stock Exchange and Cboe UK to list crypto-backed exchange-traded notes (ETNs) tied to bitcoin and ether – the crypto world’s front runners. However, the FCA’s blessing comes with a caveat: these financial instruments are strictly for institutional eyes only.

This selective admission policy has drawn criticism from various corners of the crypto arena. After all, the United States has seen a spectacular rush of interest in its “spot” bitcoin exchange-traded funds (ETFs), amassing $31 billion in investments and pushing bitcoin prices to dizzying heights. The UK’s cautious approach, however, seems to be leaving money on the table, particularly when it comes to retail investors who, unlike their professional counterparts, are left navigating the riskier waters of direct cryptocurrency purchases on exchanges.

Despite these restrictions, the gates are slowly creaking open for crypto ETP providers. Giants in the game, like the ETC Group and CoinShares, are gearing up to list their products in London, eager to tap into the market and hopeful that the retail ban might soon be lifted. WisdomTree and VanEck have also thrown their hats in the ring, eyeing the UK as a potential new battleground for crypto ETPs.

Yet, not everyone is ready to jump in. The UK’s exclusion of retail investors has left some providers hesitant, adopting a wait-and-see approach to gauge future regulatory shifts and market demand.

A Call for Inclusivity

Critics argue that the FCA’s stance is not just overly cautious but downright contradictory. Retail investors, though barred from crypto ETPs, can still purchase cryptocurrencies directly on exchanges, a route fraught with its own set of risks, including the need for digital wallets and the ever-present threat of theft.

The outcry for change is not just about opening up investment opportunities; it’s about leveling the playing field. Advocates for retail inclusion point to the success of regulated listed products in other parts of Europe and the United States, which offer investors a safer and more structured way to tap into the digital asset class.

Echoing the sentiments of industry leaders, the push for revisiting the retail ban is gaining momentum. As the UK positions itself as a global fintech leader, the ability for retail investors to participate in crypto ETPs through regulated markets could be a game-changer. Not only would this align the UK with its European counterparts, but it would also bolster the claim that the UK is at the forefront of digital asset innovation.