Crypto ETPs are expected to surge in the UK as the Financial Conduct Authority (FCA) will cease its objection towards the listing of un-leveraged crypto-backed exchange-traded notes (ETNs) on British stock exchanges such as the London Stock Exchange (LSE). This move represents a change by FCA from its previous hard-line position against digital currencies as an option for local investors.
FCA’s approval for such products could pave the way for more crypto ETP listings shortly, though access will be restricted to “professional investors” only and not ordinary retail investors. The move has already drawn criticism from industry insiders who claim that it is old-fashioned and puts UK investors at a disadvantage.
The move aims to make the UK’s crypto market more open, thereby bringing it closer to Canada and Australia, which have well-established systems of ETPs for cryptocurrencies. In particular, some major crypto ETP players like Coinshares and ETC Group are looking forward to having their products added to the list of those traded on LSE, indicating that it might be a booming market.
The move represents a step toward a more open crypto market in the UK, bringing it closer to countries like Canada and Australia that already boast established crypto ETP ecosystems. Major players in the crypto ETP space, such as ETC Group and CoinShares, have expressed interest in listing their products on the LSE, highlighting the potential for a thriving market.
“The LSE is such an important market for us,” said Bradley Duke, chief strategist of ETC Group. “We definitely will list products when possible and preparation is under way. We hope the retail ban will be lifted soon after.”
The fact that retail investors are not allowed is one major concern here. They claim that ETPs provide a safer and controlled option compared to directly purchasing crypto on exchanges which can be confusing as well as being vulnerable to theft.
“I find it ridiculous,” said Pawel Janus, an analytics manager at ETFbook. Retail investors can buy crypto on exchange. There are many different platforms to choose from and all of them are okayed. However, regulators have a problem with approving the ETP, which is usually a better structure.
Hector McNeil agreed with this point, too, and he said it was unfortunate that the regulator has not provided more clarity on ETFs. According to him, it would be better if brokers assess suitability instead of granting access first based on the system used by complex instruments.
UK Regulations And The ETP Landscape
The FCA’s cautious approach reflects a desire to balance innovation with investor protection. The crypto market’s inherent volatility and the potential for scams are valid concerns. However, some argue that the FCA’s stance stifles growth and innovation in the UK’s fintech sector.
Tim Bevan, CEO of ETC Group, linked the decision to Prime Minister Rishi Sunak’s ambitions to make the UK a global hub for digital assets. Bevan said:
If UK regulations permitted retail investors to invest in crypto ETPs via regulated markets this would bring the UK in line with much of Europe and allow those retail investors to take advantage of the built-in security that established exchanges provide
The FCA’s decision opens the door for a flourishing institutional crypto ETP market in the UK. However, the exclusion of retail investors casts a shadow over the long-term potential of this market segment. With increasing global acceptance of crypto assets, the FCA may face pressure to revisit its retail investor ban in the future.
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