The Financial Conduct Authority (FCA) will not object to requests from Recognised Investment Exchanges (RIEs) to create a UK listed market segment for cryptoasset-backed Exchange Traded Notes (cETNs). These products would be available for professional investors, such as investment firms and credit institutions authorised or regulated to operate in financial markets only.

Exchanges will need to continue to make sure sufficient controls are in place, so trading is orderly and proper protection is afforded to professional investors. cETNs must meet all the requirements of the UK Listing Regime, for example on prospectuses and on-going disclosure.

With increased insight and data due to a longer period of trading history, the FCA believes exchanges and professional investors should now be able to better establish whether cETNs meet their risk appetite.

The FCA continues to believe cETNs and crypto derivatives are ill-suited for retail consumers due to the harm they pose. As a result, the ban on the sale of cETNs (and crypto derivatives) to retail consumers remains in place.

The FCA continues to remind people that cryptoassets are high risk and largely unregulated. Those who invest should be prepared to lose all their money.

The FCA is collaborating with government, international partners and industry to develop the UK’s cryptoasset regulatory regime and lead international standards in this space.

Further information
If an RIE creates a new UK listed market segment, the FCA will consider applications on a case-by-case basis for listing cETNs on the Official List.

We will review applications for cETNs to be listed on the UK RIEs for professional only market segments. It is for the RIEs to put the professional only market segments in place.

The FCA will assess applications for listing where there is a regulated market for the cETN based on the criteria set out in the Listing Rules. As per RIE Recognition Requirements 2.6.1, UK trading venues must make sure sufficient controls are in place to ensure trading is conducted in an orderly manner and to afford proper protection to investors.

Exchanges must have the appropriate safeguards in place to ensure that the market segment is accessible to professional investors only. Exchanges must also make sure that they fully understand the nature of the risks of admitting crypto-linked instruments to trading and are satisfied that their admission to trading criteria and trading controls will adequately mitigate those risks.

Professional investors are firms such as investment firms or credit institutions that must be authorised or regulated to operate in the financial markets. They can also be referred to as ‘professional clients’.

In January 2020, the FCA introduced a ban on UK firms offering or selling crypto derivatives and ETNs that reference certain types of cryptoassets to UK retail consumers. This remains in place as part of the FCA’s conduct of business sourcebook (COBS) rules and would apply to any cETNs that are admitted to trading.

This prohibition advances our objective of ensuring an appropriate degree of protection for consumers and supports our objective of protecting and enhancing the integrity of the UK financial system.

The FCA has previously communicated that it would continue to keep its position on cETNs under review, noting the concerns outlined in the CATF report in line with our legal obligations.

The FCA continues to work with government to develop the UK’s approach to regulating cryptoassets. The FCA’s Discussion Paper on Stablecoins recently closed for input and from 8 October 2023, crypto firms wishing to promote their products or services to UK consumers must comply with the new financial promotion rules. These rules are aligned with those already in place for high-risk investments.

Although regulation of crypto in the UK remains limited, we have used our existing powers to keep firms that are unable to meet the minimum standards for preventing financial crime. Help UK consumers protect themselves against unfair or misleading crypto marketing and warn people of crypto scams and the risks of investing in crypto.