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The Financial Conduct Authority (FCA) will allow retail investors to access crypto exchange-traded notes (cETNs), according to a Friday press release.

The new rules require cETNs to be traded on FCA-approved UK-based investment exchanges, known as Recognised Investment Exchanges (RIE). Financial promotion rules will govern these products to ensure consumers receive appropriate information and are not offered unsuitable investment incentives.

“Since we restricted retail access to cETNs, the market has evolved, and products have become more mainstream and better understood,” said David Geale, executive director of payments and digital finance at the FCA. “In light of this, we’re providing consumers with more choice, while ensuring there are protections in place. This should mean people get the information they need to assess whether the level of risk is right for them.”

While firms offering these products to retail investors must comply with the Consumer Duty requirements, investments will not be covered by the Financial Services Compensation Scheme (FSCS).

The regulatory update follows the FCA’s March 2024 decision to allow recognized investment exchanges to create UK-listed market segments for cETNs targeting professional investors. The agency maintains its ban on retail access to crypto derivatives and will continue to monitor market developments.

The change represents the latest development in the FCA’s ongoing efforts to establish a regulatory framework for crypto assets, following its recently published proposals on stablecoins and other aspects of the regime.

This is a developing story.

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