On 11 March 2024, the Financial Conduct Authority (FCA) published a statement updating its position on cryptoasset-backed Exchange Traded Notes (cETNs) for professional investors.

The statement explains that the FCA will not object to requests from Recognised Investment Exchanges (RIEs) to create a UK listed market segment for 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.

The FCA also flags that:

  • Exchanges will need to continue to ensure sufficient controls are in place, so trading orderly and professional investors are given proper protection.
  • cETNs must meet all the requirements of the UK Listing Regime, e.g. in relation to prospectuses and ongoing disclosure.
  • It believes exchanges and professional investors should now be able to better establish whether cETNs meet their risk appetite, given increased and data due to a longer period of trading history.
  • It still considers cETNs and crypto derivatives to be ill-suited for retail consumers due to the harm they pose, so the ban on selling these products to retail consumers remains in place.
  • People should continue to be aware that cryptoassets are high risk and largely unregulated, and those who invest should be prepared to lose all their money.

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. It reviews applications for cETNs to be listed on the UK RIEs for professional only market segments, and it is for the RIEs to put those 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. 

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

The statement concludes with reference to the FCA’s continued collaboration with the Government, international partners and industry to develop the UK’s cryptoasset regulatory regime and to lead international standards in this space.