On the day retail access to crypto exchange traded notes (ETNs) went live in the UK per updated regulation from the Financial Conduct Authority (FCA), provider firms have pointed to the advantages offered investors in the asset class, but also certain warnings given that retail investors are affected.
Russell Barlow, CEO of 21Shares, stated: “The FCA lifting its ban on retail access to crypto ETNs is a huge step for the UK toward embracing innovation. There is a great deal of pent-up demand for regulated cryptoasset products in the UK, with 12% of adults already holding cryptoassets directly through largely unregulated platforms and exchanges.”
“The lifting of the ban on Bitcoin and Ethereum-backed ETNs is a great first step, allowing retail investors to get exposure to the two biggest cryptoassets in the most simple and secure way. As regulated ETNs, we anticipate that these will be eligible for inclusion into ISA and SIPP portfolios, allowing for tax efficient exposure to cryptoassets as part of an investment portfolio. However, there is still some ways to go until cryptoassets across the board are accepted as part of the financial system.”
“21Shares, as the world’s largest issuer of crypto ETPs, is proud to enter the UK market with over seven years of experience, a proven track record and a deep understanding of the industry.”
Nick Jones, founder and CEO of digital assets platform Zumo, added: “It’s of course an extremely welcome development for the industry, and a real sign the regulator recognises both growing investor appetite and the potential of the crypto sector to open up new opportunities.”
“At the same time, and amidst all the excitement, it’s important to remember that while cETNs are a valuable new wrapper, they are at the end of the day debt securities. They bring exposure to cryptoassets into a more familiar, exchange-traded format, which will certainly attract those more comfortable with traditional investments, but the real test will be the quality of the issuers, transparency into how the products are structured, and the robustness of the disclosures.”
“This is just the first step in the journey, and it is absolutely crucial that providers quickly think beyond the marketing to ensure they address any gaps in consumer understanding.”
“Although certain cETNs will now be open to retail investors via UK-recognised investment exchanges, in reality the access is quite limited. Listing requirements mean investors will only be able to access a small subset of cETN products that are UK listed, and we will still need to see the extent of broker pick-up. Meanwhile, the ban on retail access to crypto derivatives remains – and crypto ETFs of the US style remain impossible.”
“That’s quite a complex message for consumers to unpack, and without clear disclosures it will be easy for them to misjudge what they are investing in, what protections do or don’t apply, and where the risks lie. The industry’s role is to now make that abundantly clear, without overselling the opportunity – and in doing so providers will start acting in the spirit of the Consumer Duty.”
