Bitcoin Exchange Traded Notes Back in London
After four years away, Bitcoin Exchange Traded Notes (ETNs) are making a return to London, and the implications might be more significant than anticipated.
Starting on October 8, products like Crypto ETNs—which let retail investors gain exposure to cryptocurrency without buying the tokens directly—will be accessible once again. This follows a ban by the Financial Conduct Authority (FCA) in January 2021, which cited issues like extreme volatility and susceptibility to fraud as reasons that made these investments too risky for retail investors.
The earlier ban had also hindered developments in the UK. In contrast, U.S. spot exchange-traded funds, particularly for Bitcoin and ether, have thrived, attracting over $65 billion since their launch last January, according to data from Sosovalue. Meanwhile, European investors enjoy a variety of trading options, while UK investors often have to look overseas for regulated exposure or rely on stocks, like MSTR, as a proxy.
“People may not realize just how crucial the arrival of Bitcoin ETNs in London really is,” said Charlie Morris, who leads the digital asset investment firm Bytetree. “London stands as the second largest financial hub globally, with many funds connected to it through transactions, legal matters, and custodial services.”
For instance, the ban kept products regulated under the UCITS framework—used for mutual funds and ETFs—from accessing crypto offerings through the London financial system.
“This situation is changing. Bitcoin is set to become more accessible in the global fund market, and there’s now legal clarity. This is as pivotal as last year’s U.S. launch and might even surpass it in importance over time.”
The UK is trying to re-establish itself as a crypto hub, which it once was under Prime Minister Rishi Sunak, along with the help of Jersey-based companies like Coinshare. Figures such as former Chancellor George Osborne, now an advisor to Coinbase, caution that London risks falling behind if it doesn’t adapt to new innovations.
“The FCA’s reversal marks more than just an update in regulations; it signals a shift in the financial landscape of the UK,” Osborne stated. “Policymakers are keen to maintain the country’s relevance amidst a swiftly evolving global market.”
However, the complexity of the UK’s investment advisory industry might slow down adoption more than advocates expect, noted Peter Lane, CEO of Jacobi’s Asset Management. “Just because something is now legal doesn’t mean it’s going to be readily available to clients,” he said. “The advisory network in the UK is quite fragmented, and it may take time for advisors to comprehend the ramifications of this crypto ETN ban, adjust compliance frameworks, and modify due diligence processes before they’re ready to recommend such products to clients.”
Update (August 20th, 07:48 UTC): A broader unban of the crypto ETN has been highlighted in the second paragraph.
