The Financial Conduct Authority (FCA) in the UK has lifted the our-year ban on cryptocurrencies, particularly on crypto exchange-traded notes (cETNs). Are the British ready for an influx of these risky assets?
The 2025 Global State of Crypto report, conducted by Data Driven Consulting Group on behalf of Gemini, indicates that Europe is leading in crypto ownership, with adoption continuing to grow. In the UK, 24% of respondents said they have cryptocurrency investments, up from 18% in 2024.
Research from IG Group shows that interest in cETNs is particularly high among younger investors—50% of Brits aged 18 to 24 are interested in these products. Additionally, around 30% of adults in other age groups are considering taking positions in cETNs.
Evolving Crypto Market
Bitcoin, the pioneer and most well-known cryptocurrency, is infamous for its extreme volatility. Many investors have suffered significant losses when markets crash unexpectedly. However, the regulator’s decision to relax restrictions suggests that concerns over volatility and investor protection may be easing.
David Geale, FCA’s Executive Director of Payments and Digital Finance, stated, ‘The market has evolved, and products have become more mainstream and better understood.’ He added that cETNs offer consumers more investment options and assured that protections are in place.
Invest with Caution
The general advice remains the same: invest in cryptocurrencies such as Bitcoin and Ethereum at your own risk. Hargreaves Lansdown (HL) echoes this view, warning retail investors not to rush into these highly volatile assets despite the relaxed rules.
HL emphasises that Bitcoin is not an asset class. Cryptocurrencies are not suitable for income or growth investments, as they lack intrinsic value and are driven largely by market sentiment.
Tax Components and Policy Changes
The FCA’s change in stance appears aimed at avoiding the UK falling behind in financial innovation. Beyond portfolio diversification, the broader goal is to integrate digital finance into the mainstream economy.
The new policy allows retail investors to hold cETNs within tax-free savings accounts (ISAs) or registered pension schemes. This move to incorporate tax wrappers could increase exposure to these products and encourage wider adoption.
This development offers new opportunities for investors to diversify their portfolios, but it remains crucial to understand the risks involved.
To clarify, cETNs track the prices of Bitcoin or Ethereum but do not involve direct ownership of the coins. Market analysts note that these prominent crypto assets have matured, displaying behaviour similar to traditional assets.
However, due diligence and careful consideration are essential, given the volatility and complexity of these financial products.
Retail investors can now purchase these debt notes listed on FCA-recognised exchanges, such as the London Stock Exchange (LSE). Early issuers include 21Shares, WisdomTree, and VanEck.
Things to consider
No investment is completely safe, especially highly volatile cryptocurrencies. The risk with cETNs is that you could lose money if the issuer defaults. Remember, these debt instruments have “zero” protection under the Financial Services Compensation Scheme (FSCS).
Investors must rely on the FCA’s Consumer Duty, strict financial promotion rules, and risk warnings. In summary, buy crypto cETNs only if you have a high-risk tolerance. If losing money isn’t an option, it’s best to stay out of the crypto market.
Originally published on IBTimes UK
