The UK’s financial watchdog, the Financial Conduct Authority (FCA), is letting everyday investors buy something called crypto exchange-traded notes (cETNs). This is a big change, as before only professional investors could access them.
Why the Change?
The FCA says the crypto market has changed a lot since they put the restrictions in place. They’re now making it easier for people to invest, but with safeguards in place. This decision puts the UK in line with other countries like the US, Canada, and parts of the EU that already allow this type of investment.
What are cETNs?
cETNs are like a debt security that tracks the price of cryptocurrencies. Think of it as a way to invest in crypto without directly owning the cryptocurrency itself. They come with fees, of course. It’s important to note that these are not the same as US spot crypto ETFs, which directly hold the underlying crypto assets.
Investor Protections (and Lack Thereof)
While the FCA is opening up access, it’s not a free-for-all. There are still rules:
- Strict Marketing Rules: Companies can’t mislead people about cETNs. Information has to be clear and upfront.
- No Compensation Scheme: If the company issuing the cETN goes bust, you won’t get your money back through the government’s compensation scheme.
- Consumer Duty: Companies offering cETNs must treat customers fairly.
- High-Risk Derivatives Still Banned: The FCA is still keeping a ban on other risky crypto investments like futures and options for everyday investors. Direct investment in US spot crypto ETFs is also still off-limits.
The Bottom Line
The FCA is trying to balance letting people invest in crypto with protecting them from losing their money. They’re making some crypto investments more accessible, but it’s crucial to understand the risks involved before jumping in. Crypto is volatile, so be careful!