Recently, the UK Financial Conduct Authority (FCA) announced the end of the multi-year ban on retail investment in crypto asset exchange-traded notes (ETNs), allowing retail investors to purchase crypto asset ETNs such as Bitcoin and Ethereum on regulated stock exchanges.
Crypto asset ETNs are exchange-traded notes linked to crypto assets, similar to ETF instruments. Essentially, they allow investors to gain exposure to crypto assets through regulated exchanges.
This policy change will take effect from October 16, 2025. Following approval, platforms like the London Stock Exchange will begin trading the corresponding products. According to regulatory requirements, crypto asset ETNs listed on the London exchange must be fully backed by physical Bitcoin or Ethereum, and leverage is not permitted.
The FCA stated that the market has matured, allowing for more investment options for qualified retail clients while protecting investors. According to an FCA consumer survey, as of 2024, approximately 12% of UK adults hold crypto assets. Despite lifting this ban, the FCA made it clear that the retail ban on crypto derivative trading will remain in place to control risks.
As a supporting measure, the UK tax authority (HMRC) indicated in a policy document that such qualified crypto asset ETNs can be included in registered pension accounts from October 8, 2025, and held tax-free; from April 6, 2026, these products will be classified under the Innovative Finance ISA (IFISA) investment category, continuing to enjoy tax benefits.
According to a UK government report, the cumulative size of UK residents' Individual Savings Accounts (ISAs) is approximately £872 billion. Conservatively estimated, if 1% of these funds flow into crypto asset ETNs, it would bring over £8 billion in new investment. Industry analysis suggests that the new policy is expected to unlock pent-up demand for funds previously held back by regulatory restrictions, encouraging about 12 million cryptocurrency holders in the UK to allocate some assets into long-term investment accounts like pensions.
Bradley Duke, Head of Europe at the well-known asset management firm Bitwise, said this move is "highly positive" and will release retail funds that have been on the sidelines since 2021, helping the UK maintain its position as Europe's largest investment market.
In contrast to the regulatory openness, the UK's major retail investment platform, Hargreaves Lansdown, remains cautiously warning about crypto assets. The company emphasized in a statement that while Bitcoin's price has risen long-term, it is accompanied by extreme volatility and lacks intrinsic value itself, stating "Bitcoin is not an asset class," and therefore should not be considered a core component of investment portfolios.
Hargreaves Lansdown pointed out that there are instances of "extreme losses" in cryptocurrency's historical performance, making it difficult for investors to build reliable performance expectations based on it, and it cannot be relied upon as a means for achieving growth or income. However, the company also acknowledged that some clients have speculative demands and plans to gradually offer ETN trading services, backed by physical Bitcoin and Ethereum and listed on the London Exchange, to clients who pass a compliance risk assessment in early 2026. According to regulatory requirements, these clients' crypto investment exposure will be subject to a 10% cap and they will receive detailed risk warnings and suitability reviews before trading.
Pace of Digital Reform Accelerates. Besides lifting the ETN investment ban, the UK government has recently accelerated the construction of its digital financial infrastructure. The "Wholesale Digital Markets Strategy" released in July this year明确提出 (clearly proposed) using blockchain technology to achieve the "tokenization" of traditional financial assets, fundamentally transforming the existing manual, paper-based processes.
The strategy states that asset "tokenization" is expected to bring a qualitative change in market efficiency, for example, by improving transparency and reducing operational costs through real-time sharing of transaction data. To promote the dematerialization of securities certificates, the government established the "Dematerialisation Market Action Group" (DEMAT) to coordinate efforts to abolish physical share certificates; simultaneously, it launched the Digital Treasury Platform (DIGIT) construction plan, allowing institutions to issue government bonds via blockchain.
Lucy Rigby, Economic Secretary to the UK Treasury, announced during London Digital Asset Week that a "Digital Market Pioneer" position will be created, appointed by the government from industry leaders, responsible for coordinating institutions like the Bank of England, the Treasury, and the FCA to promote the blockchainization of financial markets and asset tokenization. Industry insiders believe this role will be an important catalyst for driving consensus between regulators and market participants and accelerating innovation.
Some analysis points out that compared to the EU, which has already introduced the Markets in Crypto-Assets Regulation (MiCA), the UK still needs to quickly clarify the regulatory positioning of new asset classes like stablecoins. David Geale, Executive Director of the UK FCA, stated: "Since we restricted retail investors from trading crypto asset notes, the market has matured. We are providing consumers with more choices while ensuring necessary protections are in place."
