The FCA lifts its ban on Cryptocurrency ETNs

Introduction

On 8th October 2025 the Financial Conduct Authority (FCA) opened up retail access to cryptocurrency exchange traded notes, lifting restrictions that have been in place since January 2021.

This represents a significant change in approach from the FCA, which up to this point had been extremely cautious regarding cryptocurrency-related products, due to understandable concerns regarding fraud, poor investor understanding, and price volatility.

As such, the FCA’s relaxation of its strict ban on this product type represents the start of a significant new chapter in UK investment markets, and the opening up of an industry that divides opinion, to say the least.

Regardless of one’s views on the asset class, it goes without saying that it is important to remain aware of latest developments in the investment industry and wider global asset types, as part of the due diligence of being well-informed investors. Put simply, we believe it’s crucial to understand the broad global asset class landscape, including cryptocurrency, and hold an informed view, rather than failing to understanding the wider investment asset set and having an uninformed view (a dangerous situation for any investor to be in).

This article explores the changes that are occurring in the UK market, led by the FCA relaxing its restrictions. It also provides a brief introduction to the crypto asset class, with a focus on the first and largest cryptocurrency, Bitcoin. We’ll finish it off with sharing our current view on Bitcoin and cryptocurrency, including a look into one of the controversial topics currently playing out within the Bitcoin ecosystem.

The FCA relaxes its cryptocurrency restrictions

As outlined in it August press release, the FCA has decided to open up access to crypto exchange traded notes (cETNs). The products must trade on an FCA-approved, UK-based investment exchange, and FCA financial promotion rules will apply to ensure consumers remain appropriately informed.

As opposed to the Bitcoin ETFs that went live in the US last year (which we’ll share more information on below), the FCA’s authorisation is restricted to ETNs. As the name suggests, ETNs are traded on centralised exchanges like ETFs and traditional shares, however whereas an ETF buys the asset it’s seeking to replicate and then sells shares of that ownership, ETNs are a debt-based instrument that tracks the value of an underlying asset, but doesn’t directly own it. The rationale behind the FCA’s decision appears to be regarding concerns over custody risk – given an ETN doesn’t own the asset directly but gains exposure via contract, there is hypothetically lower custody risk (at the ETN-issuer level), however in contrast there is higher issuer risk (as successful tracking is more dependent on the issuer’s solvency).

The relaxing of FCA restrictions means that product providers now have the freedom to provide solutions that include cETNs, and some have already suggested that they will do so. We will soon see the extent to which this is taken up, however initial expectations are for crypto ETN products to be offered on an execution-only basis by some wealth managers, as well as potentially broader retail access for example through the FreeTrade and Interactive Investor platforms.

A refresher on Bitcoin and the wider cryptocurrency space

The ‘crypto’ in cryptocurrency is certainly appropriate. For those not versed in the blockchain, proof-of-work validation, or ‘halvings’, the terminology alone can sometimes feel as though it’s been encrypted.

It began with a whitepaper published on 31 October 2008 by an individual going by the pseudonym Satoshi Nakamoto. The whitepaper was entitled “Bitcoin: A Peer-to-Peer Electronic Cash System”, and within it the author claimed to have developed a system that enabled “online payments to be sent directly from one party to another without going through a financial institution”. While the concept sounds simple in principle, in practice the idea was revolutionary – in our modern financial system payments are facilitated by third parties (for example banks and payment processors) – Satoshi (as most crypto-versed individuals refer to him) claimed to have invented a monetary system which bypasses these entities, and allowed individuals to transact digitally peer-to-peer (similar to how we might transact using physical cash with each other in the real world).

No new cryptography was invented in order to develop Bitcoin; instead, Satoshi put together a range of existing cryptographic concepts in a novel way, including digital signatures, cryptographic hashes (a form of ‘digital fingerprint’ based on certain inputted data), and a proof-of-work algorithm (a computationally difficult puzzle that requires the expenditure of computing power, and therefore energy, to solve).

Following the whitepaper, the Bitcoin network was officially launched on 9th January 2009, with this marking the start of the first cryptocurrency, with it remaining the most valuable asset in the crypto-asset industry today (estimates vary, however as of early October 2025 the total market capitalisation of the full crypto-asset space was estimated to be $4.3 trillion, with Bitcoin accounting for $2.5 trillion of this; just under 60%¹).

At its heart, Bitcoin is a public record (a ‘ledger’) of who owns what, and which transactions have been made to and from different addresses on the network. Every 10 minutes (on average) blocks of transactions between parties get added to the end of a long chain of previous such blocks – a ‘blockchain’. This transaction settling process is undertaken by bitcoin miners (nowadays more typically groups of miners working together in a ‘mining pool’), with these miners solving computationally-difficult mathematical puzzles in order to gain the right to mine the next block, and be rewarded with fresh bitcoin for doing so (as of the time of writing each new bitcoin block rewards the lucky miner or mining pool with 3.125 new bitcoin).

Importantly, in addition to understanding computer science to a degree which enabled him to invent the Bitcoin system through the combination of existing cryptographic concepts, Satoshi also clearly had a strong understanding of economic theory and behavioural biases. He understood that one of the flaws of existing modern fiat currencies (including the dollar, pound, and euro) was that are continually being eroded by inflation – that is, new currency units are created (for example through bank lending or quantitative easing), leading to the currencies gradually being devalued over time , and therefore acting as poor stores of value (anyone who has held their life savings in the UK pound throughout recent years of high inflation can attest to this fact).

To address this, he designed Bitcoin to have a fixed amount of supply – 21 million coins in total – which would gradually be released to the market over decades through the mining process. At the beginning of the Bitcoin network, each new 10-minute bitcoin block rewarded the miner with 50 new bitcoin. Four years later this reward dropped to 25 bitcoin, dropping again four years later to 12.5 bitcoin, and so on. This is the bitcoin halving event that you may have heard of – every four years the number of new bitcoin being allocated through the bitcoin mining process is cut in half. As noted above, this reward stands at 3.125 bitcoin today, following the last ‘halving’ in April 2024, and this number will be cut to 1.5625 bitcoin in approximately April 2028.

By designing the system this way, Satoshi invoked two strong behavioural biases; firstly, the idea of true digital scarcity – by investors knowing that there will only ever be 21 million bitcoin in existence, bitcoin investors by their own admission feel the urgency to acquire as much bitcoin as they can, “before the rest of the world figures it out”. Secondly, the four-yearly halving event creates a ‘supply shock’, in which supply of new bitcoin is cut in half. Basic economic theory informs us that when supply falls and demand remains constant, then price will go up as the equalising factor. And historically speaking, that is what we’ve seen – there is a reason why bitcoin enters into the news every four years or so following its latest increase in price – it has followed a four yearly rhythm in which a supply shock (latest halving April 2024) leads to the start of an increase in price, with this price story playing out over the following 12-18 months, typically culminating in a mania (and the stories we are familiar with of investors buying bitcoin on credit cards, overdrafts, and the like) following by a brutal crash as the mania inevitably runs out of stream (with those investors paying a very heavy price for their actions), before the cycle has historically repeated itself. Though there is of course no guarantee that future market behaviour will follow the same pattern.

Going into further detail on Bitcoin is beyond the scope of this article, however we will be delivering a webinar in November where we provide more information on the topic, and expand on some of the areas covered in this post (link at end of article).

While Bitcoin was the first, it definitely wasn’t the last cryptocurrency, with tens, then hundreds, thousands, and now millions of other competing cryptocurrencies brought into existence. Most are outright scams, and are the type of assets that rightly set off alarm bells as investors. The cryptocurrency space is of course highly speculative in nature, however it is a spectrum; with Bitcoin on the one end (as the longest standing and most robust cryptocurrency), and meme-coins on the other end (which are openly launched as jokes, but have gained value due to committed fans and followers).

There are then many other cryptoassets along the spectrum, including Ethereum, the second largest cryptocurrency by market capitalisation ($560bn as of early October 2025, or c.13% of the total crypto-space market capitalisation¹). Ethereum’s aims are somewhat different; it seeks to provide a global decentralised platform for applications (rather than just a decentralised currency), but once again providing this without a reliance on central authorities.

The rise of Bitcoin

At its launch in 2009 each bitcoin was worthless; only Satoshi knew about the system, and he had the unenviable task of trying to pitch his new money to the world. A seminal moment in Bitcoin’s history came on 22 May 2010, when a programmer from Florida, Laszlo Hanyecz, offered to buy two pizzas in an online forum and pay in bitcoin, marking the first documented instance of Bitcoin being used to buy a physical good (with two pizzas costing Mr Hanyecz 10,000 BTC).

Fast forward to today, and at the time of writing one bitcoin is worth approximately $125,000, having been boosted in the last 18 months through the halving supply shock (as outlined above), and an increasingly accommodating stance from governments and regulators around the world. In the US, spot Bitcoin ETFs went live in January 2024, with the most successful product² now having an AUM of almost $100 billion. While President Trump promised to make the US the “cryptocurrency capital of the world”, and has repeatedly spoken about setting up a US strategic bitcoin reserve, to go alongside its gold reserves in Fort Knox.

As such, while many claims can be made against Bitcoin as an asset class, it would be wrong to state that it hasn’t been successful, up until this point. The question is of course, whether this is sustainable, or whether this meteoric rise may turn into a similarly meteoric fall, with Bitcoin’s detractors stating that the threat of regulatory bans from other countries around the world remains an ongoing risk, the asset is dependent on a ‘greater fool’ to sell to, and that Trump may do a characteristic 180, and turn against the industry he has until recently seemed committed to support. Time, as always, will tell.

ebi’s stance

Put simply, we do not intend to allocate to crypto ETN products in our portfolio suites following the announcement of this rule change. While we believe that there is a lot that is misunderstood regarding the crypto asset class (including the difference in risk and speculation between Bitcoin and the other cryptocurrencies to say the least), we believe it remains too early to offer a portfolio suite with direct Bitcoin or any other cryptocurrency exposure in it to our clients (while also noting that almost all global equity market investors have a small degree of exposure to Bitcoin already, through owning companies which themselves hold Bitcoin, such as Tesla, Strategy, and Block – two of which are in the S&P 500).

There is a lot of hype around Bitcoin currently, and one can argue that some of it is deserved given just how supressed and misunderstood Bitcoin has been in traditional investment circles. However, we believe the situation is a significantly more complicated than this.

Bitcoin is an open-source software project. What this means is that its codebase is both publicly available and continually being refined and upgraded by contributing developers, with the support of a large online community. As such it can be seen as a living breathing asset, quite different to others such as gold, to which it is often compared (note: Bitcoin is often called ‘digital gold’, due to it sharing the characteristic of scarcity found in gold, but in the digital space).

At the time of writing there is an increasingly hostile debate occurring within the Bitcoin community and its developers regarding some of the finer aspects of how the protocol should function and perform (particularly as it relates to how non-financial transactions, such as digital art or other images, should be treated within the blockchain). As the resolution of this situation will likely set the direction of Bitcoin for the coming years, we continue to monitor how this situation plays out, with Bitcoin’s upcoming October 2025 update (version 30) being one of the key flashpoints in this battle.

The situation is beginning to resemble the ‘war’ in bitcoin experienced in 2015-2017, which ultimately culminated in the blockchain splitting into two, with two competing versions of Bitcoin being present in the market (the Bitcoin covered above, and a secondary cryptocurrency, Bitcoin Cash, which continues to exist today albeit with a far lower market capitalisation of $12bn at the time of writing¹).

In light of this, while criticisms of Bitcoin being ‘too speculative’ are often thrown at it without too much consideration, we believe this does indeed remain the case at this point in time, as it relates to ebi’s portfolios. Nonetheless, we continue to monitor the asset, the cryptocurrency space, along with a wider range of global asset classes, continually testing our investment stance and philosophy.

If you would like to dig deeper into this topic, then we will be holding a webinar in November covering the FCA’s recent changes and expanding further on some of the areas covered in this blog). To sign up, please head to the following webpage.

Our investment team are also open to deeper discussions regarding this emerging asset class, and other asset classes, if you would like to further explore them with us. To book in a meeting please contact your usual ebi representative or email enquiries@ebi.co.uk.

1 Source: coinmarketcap.com/charts
2 Source: BlackRock

For financial professionals only.

For financial advisors only. This document is intended solely for individuals or entities that meet the professional client criteria as outlined in COBS 3 of the FCA handbook. It is not intended for use by, nor should it be distributed to retail clients under any circumstances.

Risk Warning

Investing in cryptoassets involves a high level of risk, and you should be prepared to lose all the money you invest. The value of cryptoassets can be extremely volatile, and their price may fall as quickly as it rises. The cryptoasset market is largely unregulated, meaning you could lose your money due to risks such as cyber-attacks, fraud, or firm failure. You will not be protected by the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service (FOS) if something goes wrong. You may also find it difficult to sell your investment when you want to, as liquidity depends on market conditions and operational factors such as system outages or cyber incidents. Cryptoasset investments can be complex, and it is important that you fully understand the risks before investing.

Disclaimer

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Our publications do not offer investment advice and nothing in them should be construed as investment advice. Our publications provide information and education for financial advisers who have the relevant expertise to make investment decisions without advice and is not intended for individual investors.

The information we publish has been obtained from or is based on sources that we believe to be accurate and complete. Where the information consists of pricing or performance data, the data contained therein has been obtained from company reports, financial reporting services, periodicals, and other sources believed reliable. Although reasonable care has been taken, we cannot guarantee the accuracy or completeness of any information we publish. Any opinions that we publish may be wrong and may change at any time. You should always carry out your own independent verification of facts and data before making any investment decisions.

The price of shares and investments and the income derived from them can go down as well as up, and investors may not get back the amount they invested.

Past performance is not necessarily a guide to future performance.

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