FCA lifts ban on crypto trackers in growth push
The Financial Conduct Authority is poised to lift its ban on offering a type of crypto tracker to retail investors even though it could mean they “lose all their money”, in the latest sign of loosening financial red tape in a bid to help kickstart growth.
The City watchdog has proposed allowing investment platforms to offer their customers crypto exchange traded notes (cETNs), which until now has now been prohibited to professional investors.
cETNs can be traded somewhat like stocks and shares – working by tracking the performance of popular crypto assets like ethereum, ripple and bitcoin – but investors never actually own the asset.
The FCA first granted access to the product to professional investors last year.
But in its announcement permitting qualified investors, the watchdog said it had stopped short of extending their permission to individuals, saying they were “ill-suited for retail consumers due to the harm they pose”.
The decision is one of the clearest signs yet of the FCA’s new, lighter-touch approach to regulation in the face of growing pressure from central government for regulators not to impede economic growth.
Watchdogs under the microscope
In December, Keir Starmer, Rachel Reeves and business secretary Jonathan Reynolds co-authored a letter to the UK’s largest watchdogs demanding they come up with several ideas that will help the government in its growth mission.
“Improving regulation in the UK – ensuring that it enables growth and does not unduly hold back investment – is an essential part of this government’s growth mission,” the letter, which was the FCA received, read.
““This is a shared endeavour in which we all have a stake, and therefore we would like your support in delivering it.”
And on Friday, David Geal, executive director of payments and digital assets at the FCA, directly alluded to that new-look mindset, saying that lifting the cETN was partly an attempt to “rebalance [its] approach to risk”.
“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.”
The proposal to allow retail investors to put their money into cETNs was one of several outlined by the watchdog as part of a quarterly consultation paper, which it said would “further reduce burdens on firms and support economic growth”.
It cited several other developed economies – including Germany, Hong Kong and the United Arab Emirates – which already permit retail inclusion in the investment product.
Responding to the proposal, Michelle Kirschner, co-chair of Gibson Dunn’s financial regulatory practice group, said: “This is an interesting move from the FCA and is in line with the recent change in mood music at the FCA as regards crypto assets generally. [But] it will – if adopted – bring the UK into line with the position in many other major markets globally.”