There’s been a lot of chatter in markets this week about the FCA’s decision to lift its ban on cryptocurrency Exchange Traded Notes (ETNs) for retail investors. The move, which takes effect tomorrow (Wednesday 8th October), marks a notable shift in UK policy and follows similar steps by regulators in the US, Germany and Switzerland.
while crypto assets are edging closer to the mainstream, we believe the risks remain substantial
Crypto ETNs are listed securities designed to track the price of cryptocurrencies such as Bitcoin or Ethereum. While they allow investors to gain exposure without directly holding the underlying assets, they remain highly volatile and are not covered by the Financial Services Compensation Scheme (FSCS). The FCA has categorised them as Restricted Mass-Market Investments (RMMI), meaning they can only be sold with enhanced risk warnings and suitability checks.
Our View
Crypto assets are undergoing a significant period of transformation. Once dismissed as the domain of speculators and fringe actors, the space has often been likened to the ‘Wild West’ of finance and largely ignored by mainstream institutions. Today, however, the landscape is shifting. The new Trump administration has sparked renewed interest among leading corporate executives and business owners.
Even before this current administration, we saw the launch of regulated crypto ETFs in the United States and Canada, and the UK is now preparing to introduce crypto exchange-traded notes following a reversal in FCA policy. These developments mark a clear move towards institutional acceptance.
From our perspective, while crypto assets are edging closer to the mainstream, we believe the risks remain substantial. Our priority is to safeguard client wealth from excessive risk exposures. We are not yet at the point of including crypto in client portfolios, but it is essential that we continue formal discussions at investment committee level.
To date, we have been discussing and broadening our understanding of plans for Central Bank Digital Currencies (CBDCs), which we believe could be the endgame. For now, we prefer to monitor the evolution of the asset class closely from the sidelines, ensuring we fully understand both the risks and opportunities before making any decisions involving our clients’ hard-earned capital.
This article from Citywire provides useful context, along with an interview with the FCA, on their policy change and the current market landscape.
