The UK's Financial Conduct Authority (FCA) on Monday announced that it will allow certain investment exchanges in the country to create a new market segment for Exchange Traded Notes (ETNs) backed by cryptocurrencies.
What Happened: This decision will let professional investors, such as investment firms and credit institutions, invest in these crypto-backed securities.
However, the FCA has set strict rules for exchanges to follow to ensure that trading is fair and that professional investors are protected. The crypto-backed ETNs must also follow the UK Listing Regime's rules, which include requirements for prospectuses and ongoing disclosure.
The FCA has made this decision after gaining more knowledge and data about how cryptocurrencies have been traded over time. This information helps exchanges and professional investors decide if these crypto-backed ETNs fit their risk preferences.
Despite this decision, the FCA still believes that crypto-backed ETNs and crypto derivatives are not suitable for everyday consumers, as they could potentially cause harm. Therefore, the current ban on selling these products to retail consumers will continue.
The FCA has also reminded the public that cryptocurrencies are high-risk and mostly unregulated, and investors could lose all their money. The FCA is working with the government, international partners and the industry to improve the UK's rules for cryptocurrencies and to set international standards in this area.
Exchanges interested in creating this new market segment for crypto-backed ETNs will have their applications reviewed by the FCA on a case-by-case basis.
The FCA will ensure that these exchanges have the necessary controls in place to conduct trading fairly and protect investors.
What's Next: This policy follows the introduction of a ban in January 2020 on UK firms offering or selling crypto derivatives and ETNs that reference certain types of crypto assets to UK retail consumers.