Over the years, the FCA has repeatedly flagged concerns about the extreme volatility of crypto assets
It’s a historic moment for the cryptocurrency market as the US Securities and Exchange Commission (SEC) finally approved eleven spot Bitcoin ETFs. Crypto enthusiasts around the world are looking on excitedly. Unfortunately, a similar product for UK investors is highly unlikely to be approved, according to one financial advisor.
This latest approval in the US for the first-ever spot crypto ETFs throws open the doors for institutional and retail investors. It seems the UK will lag on the crypto ETF action.
The UK is the second-largest economy in Europe and currently the sixth-largest in the world, following the US, China, Germany, Japan and India. Where does the UK stand when it comes to crypto products? Well, it’s no secret the UK has been increasingly tough when it comes to crypto.
“I am personally doubtful that the UK’s Financial Conduct Authority will authorise Bitcoin or other cryptocurrency ETFs to be made accessible to UK retail investors any time soon,” said Jason Hollands, Managing Director at investing platform Bestinvest.
FCA Ban Implemented 2021
In January 2021, the FCA implemented a ban on the sale of derivatives and exchange-traded products. The FCA said it considers the products to be ill-suited for retail consumers due to the potential harm they pose.
Hollands notes that Bitcoin enthusiasts among the UK’s estimated nine million self-directed investors who use online platforms and apps to manage their investments through ISA, SIPP and general investment accounts –might be in for a wait to have the same choice as their US counterparts.
Over the years, the FCA has repeatedly flagged its concerns about the extreme volatility of crypto assets, the high risk of losses and the difficulties retail investors face in valuing them.
“For an ETF to be made directly available by a UK regulated investment platform, under a regulation known as PRIIPs (Packaged Retail and Insurance-based Investment Products Regulation) ETF and other fund providers must comply with UK regulatory requirements in terms of producing a Key Information Document, which a US-listed ETF won’t have,” explains Hollands.
Institutional Investors Can Access Crypto ETPs
However, it is important to note that institutional investors (not retail) can access crypto products through Goldman Sachs, ICAP, JPMorgan, and UBS. Exchange-traded products offering exposure to cryptocurrencies are readily available.
“Even [if] Bitcoin or cryptocurrency ETFs to become authorised in the UK in the near future, it is possible that these would be primarily accessible for professional investors such as discretionary fund managers or those certified as sophisticated investors,” said Hollands.
He goes on to explain that this is due to the FCA’s Consumer Duty principle, which was a major regulatory development in the financial services sector last year.
“It aims to increase consumer protection for retail investors and ensure regulated firms are focused on good client outcomes, and as a result execution-only investing platforms have become more cautious about the access they provide to higher risk or more complex products, rather than relying on the caveat emptor ‘buyer beware’ principle which was widely assumed to have prevailed previously,” explains Hollands.
For now, UK retail investors will have to watch on in envy as US investors can access a range of exciting new spot Bitcoin ETFs.
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