UK’s Financial Conduct Authority (FCA) lifted its ban on crypto exchange-traded notes (ETNs) on 8 October, allowing investors a new way to gain exposure to cryptocurrencies.

This is Money reports that these products, which track the price of digital assets without requiring investors to hold them directly, are similar to ETFs but carry higher risk.

ETNs differ from physical ETFs in that they do not need to hold the underlying assets. Instead, providers aim to match the return of the tracked index by any method they choose.

Figures from investing platform IG suggest the UK’s crypto market could grow by around 20% as new investors explore these products.

However, retail investors will not be able to access crypto ETNs immediately. Providers must first submit prospectuses for FCA approval, and the FCA only began accepting drafts on 25 September.

Investors are expected to gain access from at least 13 October.

Discussions between the FCA and the London Stock Exchange (LSE) over whether a new exchange segment was needed for these products contributed to the delay.

Thomas Brown, partner at Shoosmiths, described the delay as “concerning, especially given that European and US retail investors already enjoy access to similar products.”

Harvey Knight, partner and head of UK financial services regulatory at Withers, said the delay “is not necessarily a mere operational blip but quite symptomatic of how the UK has handled its approach to crypto and digital assets more generally.”

The FCA argued the delay was procedural.

A spokesperson told This is Money:

“We had to wait until the segment opened on the LSE before we could start reviewing prospectuses. That happened on 23 September, and we started accepting prospectuses for review two days later. We are progressing policy development in support of the development of a sustainable, competitive crypto sector. We want to rebalance risk, and lifting the ETN ban allows people to make the choice on whether such a high-risk investment is right for them.”

Crypto ETNs carry counterparty and issuer risk rather than true asset ownership.

Seventeen crypto ETNs are listed on the LSE, including products from WisdomTree, Fidelity and Invesco, but have been limited to institutional investors over the past year.

HMRC confirmed on October 8 that these products can now be held in stocks and shares ISAs and registered pension schemes, offering tax-free exposure to cryptoassets for the first time.

From April next year, however, they will be reclassified as qualifying investments for innovative finance ISAs and become ineligible for stocks and shares ISAs, though the government will review this as the market matures.

Featured image credit: Edited by Fintech News Switzerland, based on image by Art Rachen via Unsplash