The UK’s Delay in Approving Retail Access to Crypto ETPs
The UK is one of the few major global markets that has yet to approve retail access to cryptocurrency exchange-traded products (ETPs). While other countries and states have embraced these products, the UK has refrained from allowing small investors to purchase them. Even the US has introduced 11 spot Bitcoin (BTC) ETFs on Wall Street, managed by well-known names such as BlackRock, Invesco, and Fidelity, highlighting the UK’s divergence from other financial centers.
FCA’s 2021 Ban on Crypto Derivatives
Back in 2021, the Financial Conduct Authority (FCA) in the UK banned the sale of cryptocurrency-related “derivatives,” including ETPs, to retail investors. The ban was primarily motivated by concerns around leveraged products and their impact on the highly volatile Bitcoin. However, the ban also affected unleveraged products like plain vanilla ETPs and futures. Some industry experts have criticized the FCA’s approach, particularly its rule that allows retail investors to invest directly in cryptocurrencies but prohibits access to regulated ETPs listed on established exchanges.
UK Investors’ Options for Exposure to Crypto
Currently, UK retail investors seeking exposure to cryptocurrencies have two options. They can either purchase digital tokens directly from crypto exchanges or invest in shares of companies that track cryptocurrencies. However, there is a demand among retail investors for ETPs directly investing in cryptocurrencies. With the recent surge of interest in cryptocurrencies following the US launches of crypto ETPs involving prominent asset managers, some believe the FCA will need to reassess its position. However, there are also concerns about granting complete access to all UK retail investors.
Hot Take: Will the FCA Change Its Stance?
Despite arguments favoring regulated ETPs, there are doubts that the FCA will change its stance. The FCA has raised concerns about the volatility of crypto assets, their links to financial crime, and the challenges in valuing them. While there may be a need for reassessment, it is important to consider appropriate measures and safeguards for retail investors. Striking a balance between access and protection is crucial in navigating the evolving landscape of cryptocurrency investments.
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