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FCA changes course on cryptocurrency securities

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Having been adamantly set against the idea of listed securities in London backed by cryptocurrencies, the FCA seems to be in the process of changing course. Yesterday the regulator said it would not object to the creation of exchange traded notes backed by Bitcoin or Ethereum.

Issuers will be able to apply to get their ETNs listed in London from April. Expect a rush of products for UK traders. The news also helped to push the price of BTC even higher.

Bitcoin is officially back as the most popular cryptocurrency and breached all-time record highs in the last 24 hours with the price at US$72,427 at the time of writing.

Why is the FCA reversing out of its previous ban?

Readers may recall that in 2021 the FCA banned crypto-related derivatives, including financial spread bets and CFDs, but also exchange-traded products with zero leverage. In terms of risk profile, ETNs based on Bitcoin were a far cry from a x100 leverage CFD bet, but the FCA opted for a blanket ban.

At the time the FCA was marching in lock step with the SEC. Providers of listed ETNs used continental European exchanges instead to get their products out. The FCA has changed its position following the SEC’s decision to approve spot Bitcoin ETFs, which began to make London’s financial sector look increasingly isolated. The FCA was also being criticised by crypto market professionals about its stance.

The FCA repeated that it felt crypto-linked derivatives like spread bets were too risky for the retail market. It is also unlikely to sign off on any cryptocurrency-backed ETFs that contain any leverage. It seems most concerned about the ability for retail traders to evaluate the risk contained in leveraged products.

Good news for UK ETF traders

The FCA’s move is a good one for UK-based traders who had previously been using products in the Eurozone or Switzerland. Some continue to trade leveraged crypto in high risk offshore trading accounts or crypto wallets.

The move could see the introduction of some very substantial and high volume ETNs in London. Around one in three (33%) crypto investors are trading at least once a day with half of them trading several times, according to new research from GraniteShares, a global issuer of ETPs (exchange-traded products) with more than $2.5 billion under management.


In the US market, the robust price action continues to be fuelled by the positive momentum of BTC spot ETFs. Last week, the 10 BTC Spot ETFs witnessed a cumulative net inflow of approximately $2.2 billion, bringing the total net inflow since inception close to $10 billion, currently standing at $9.6 billion.

Notably, the nine newly launched ETFs collectively surpassed the $20 billion net inflow milestone, with Blackrock BTC ETF alone recording more than $10 billion in net inflow. However, it is essential to note that this inflow is partially offset by the continuous outflow recorded by the Grayscale BTC ETF, which was converted from its previous structure as a Trust and has seen about $10.5 billion in outflow since inception.

The GraniteShares research found most retail crypto investors are active traders – 24% say they trade at least several times a month with 25% saying they trade several times a week.

Around one in six (16%) of crypto retail investors prefer to focus on shares associated with the sector compared with 29% who prefer only to buy and sell cryptocurrencies. Some traders have been getting access to the price dynamics of crypto via listed products based on companies like Coinbase and MicroStrategy, which have high economic exposure to crypto prices.

The GraniteShares research found a wide spread in the amounts that retail crypto investors are trading each month – around 27% say they trade up to £100 while 22% are trading more than £1,000 a month with 4% estimating the value of their trading exceeds £10,000 a month.

Why was the approval of Bitcoin ETFs by the SEC so important?

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