LONDON – The UK will lift a ban on critical types of crypto debt security to keep up with the US and other financial hubs as it appears to be a global hub for digital assets.
On Friday, the Financial Conduct Bureau, the UK’s main regulator of financial services, announced a proposal to reverse the ban on providing retail investors with notes traded on crypto exchanges.
Notes traded on exchanges are a type of debt instrument linked to one or more designated assets (cryptocurrencies). Essentially, investors can use regulated exchanges to touch digital tokens.
Crypto ETN sales to retail investors have been banned in the UK since banning in 2019 due to concerns about the potential harm the FCA is bringing to consumers.
However, on Friday, the FCA said it had proposed to lift the ban on crypto ETNs “to support the UK’s growth and competitiveness.” The watchdog added that restrictions on cryptographic derivatives remain in force.
“The consultations demonstrate our commitment to supporting the growth and competitiveness of the UK’s crypto industry,” David Gill, executive director of payments and digital assets at the FCA, said in a statement.
“We want to recalibrate our approach to risk and lifting the ban, which will allow people to choose whether such a risky investment is right for them, as they could potentially lose all their money.”
“Major Milestones”
This development has been quickly praised by crypto companies as a key moment for the UK industry. When it comes to digital assets, it is perceived to be behind the US, the European Union and other global players.
Spot Crypto Exchange-Traded Funds are available in the US since the Securities and Exchange Commission approved a change to the rules early last year to allow the creation of the first Bitcoin Link ETF.
In April, the UK government issued a draft bill for the crypto sector with the goal of making the country a “world leader in digital assets.” The FCA is working on a separate detailed roadmap of consultation and discussion papers to implement Crypto’s regulatory regime by 2026.
“Until now, the UK has been an ETN outlier. We hope this move will improve consumer protection and we will continue to insist on banning retail investors from accessing highly regulated derivative products.”
Bivu Das, UK general manager at Kraken, said the proposal to approve the sale of crypto ETNs to consumers marked a “big milestone in the UK crypto ecosystem.”
The FCA “recognizes that the market has matured significantly and that outdated restrictions no longer serve the intended purpose,” Das added. “This kind of regulatory move is important for the UK to stay competitive in the competition to lead its digital assets.”
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