In a pivotal shift in its regulatory approach, the UK’s Financial Conduct Authority (FCA) has proposed lifting its 2021 ban on retail access to crypto exchange-traded notes (cETNs). Announced on 6 June 2025 via Consultation Paper CP25/16, this move is framed as part of the regulator’s ongoing efforts to modernise the cryptoasset regime, strengthen consumer protection, and support UK financial competitiveness.
At Recap Technologies, we welcome this long-overdue development. As a UK-based firm providing cryptoasset tax and compliance solutions for individuals and professionals, we have witnessed first-hand the confusion, limitations, and tax challenges that the existing ban has created. We’ve submitted a formal response to the FCA with our full support — and a recommendation to go further by permitting physically-backed crypto ETFs.
But to appreciate the full significance of this shift, we need to look back at how we got here.
A Look Back: The 2021 FCA Ban on Crypto ETNs and Derivatives
In October 2020, the FCA published final rules banning the sale, marketing, and distribution of derivatives and ETNs referencing unregulated cryptoassets to retail consumers. This sweeping ban, which came into effect on 6 January 2021, was motivated by a range of perceived consumer risks:
- Cryptoassets were seen as lacking a reliable basis for valuation
- Market abuse and cybercrime were considered prevalent
- Price movements were deemed too volatile
- Retail consumers were thought to lack sufficient understanding
- There was said to be no legitimate investment need for retail access
The regulator estimated that the ban would prevent retail losses of around £53 million. But in hindsight, the opportunity cost was vastly greater.
In October 2020, when the ban was announced, Bitcoin was trading at around £8,000. As of 9 June 2025, it is priced close to £80,000 — a nearly tenfold increase. This ban, intended to protect retail investors from speculative losses, ultimately excluded them from one of the most significant asset booms of the decade.
The irony is unmistakable: while other jurisdictions provided regulated avenues to invest in crypto via structured products, UK investors were either left out or pushed into higher-risk, less transparent channels. That experience has highlighted the dangers of overcorrection — and the need for more balanced, forward-looking regulation.
The 2025 Proposal: Access with Guardrails
Under the FCA’s new proposal:
- Retail investors will be able to access crypto ETNs, provided they are traded on FCA-recognised investment exchanges (RIEs).
- The ban on crypto derivatives (e.g. CFDs, futures) will remain in force.
- All financial promotion rules will apply, ensuring fair disclosures and warnings for consumers.
As David Geale, FCA Executive Director of Payments and Digital Finance, stated:
“We want to rebalance our approach to risk and lifting the ban would allow people to make the choice on whether such a high-risk investment is right for them, given they could lose all their money.”
It’s a welcome shift. One that prioritises transparency and informed choice, rather than outright exclusion.
Recap’s Response: Supportive, with Room to Grow
1. Regulated Access is the Right Move
We fully support lifting the cETN ban for retail investors. It introduces a safer, more transparent route to crypto exposure — governed by the FCA and structured around recognised exchanges.
Such products, when properly listed and regulated, offer significant advantages:
- Institutional-grade oversight
- Clearer product disclosures
- Tighter spreads and greater liquidity
- Stronger investor protections than many spot markets
It also brings the UK in line with global standards, including those in the EU and the United States, where these instruments are now mainstream.
2. Simpler Tax Outcomes, Better Consumer Experience
At Recap, we've supported thousands of UK crypto investors in navigating HMRC compliance. Retail access to cETNs will:
- Enable fiat-based disposals, making CGT calculations more intuitive
- Reduce complexity linked to crypto-to-crypto or stablecoin trades
- Open potential eligibility for ISA and SIPP wrappers
- Decrease the need for Self Assessment filings, particularly given the lower CGT allowance of £3,000
These are tangible improvements to consumer outcomes and closely aligned with the FCA’s Consumer Duty principles.
3. The Case for Physically-Backed Crypto ETFs
While we applaud the move on cETNs, we believe the next step is clear: the FCA should also allow physically-backed crypto ETFs.
These products:
- Are asset-backed, not debt-based
- Feature auditable reserves and custody
- Generally carry significantly lower fees
Consider:
- CoinShares Bitcoin Tracker Euro (a cETN): 3.42% annual fee
- iShares Bitcoin Trust ETF (NASDAQ: IBIT): 0.25% annual fee
This stark difference — over 13x — has a direct and compounding effect on long-term investor returns. Opening the UK market to ETFs would stimulate competition, reduce costs, and better serve consumers.
Conclusion: A Balanced Step Forward
The FCA's move to lift the cETN ban is a major inflection point in UK crypto regulation. It signals a willingness to adapt, to align with global peers, and to trust consumers with access to high-risk — but potentially high-reward — financial products when proper protections are in place.
But the job isn’t done. To unlock the full benefits of regulated crypto exposure — including stronger consumer safeguards, tax clarity, and competitive fees — the UK must also embrace physically-backed crypto ETFs.
Recap Technologies is proud to be part of this conversation, and we remain committed to supporting consumers, professionals, and regulators in building a safer, smarter crypto economy.
Read our full letter:
