The UK is entering a new chapter in its crypto journey with the FCA's recent green light for CoinShares to launch Bitcoin and Ethereum exchange-traded notes (ETNs). This opens the floodgates for retail investors to step into the crypto market, but it also triggers an intense competition among ETN providers that could lead to slashed fees across the board. How will this impact you as an investor? Let's take a closer look.
What Does FCA Approval Mean?
On October 31, 2025, the FCA approved CoinShares Digital Securities' prospectus for its Physical Staked Ethereum (ETHE) and Physical Bitcoin (BTC) ETNs. This marks a significant shift in the UK’s regulatory landscape. Retail investors can now buy these products on regulated exchanges like the London Stock Exchange. This is a departure from the FCA's previous stance, which had banned retail access to crypto ETNs since 2021.
The Fee War: A Double-Edged Sword?
CoinShares is launching its Ethereum ETN with a jaw-dropping 0% management fee, the lowest in Europe. This price war among crypto ETN providers is set to escalate as the UK reopens its retail ETN market. Expect to see more listings from big names like CoinShares, WisdomTree, and 21Shares. But here's the catch: could this race to the bottom hurt investor protections?
Risks to Consider: Volatility and Investor Protections
While this is a step forward for retail investors, we need to be cautious. Crypto assets are notoriously volatile. Prices can swing wildly, which could lead to significant losses. And since ETNs are debt instruments, you're at the mercy of the issuer and counterparty risks. If the issuer goes bankrupt, you could lose everything.
To add another layer of complexity, there's no FSCS protection for crypto ETNs. This means that if something goes wrong, retail investors won't be compensated. This could make some investors hesitant to dive into this new landscape.
Regulatory Framework: A Safety Net?
Despite these risks, the FCA has put in place a regulatory framework that offers some protections. Crypto ETNs fall under Restricted Mass Market Investments (RMMIs), and firms must adhere to strict guidelines. This includes:
- No incentives to invest
- Thorough client assessments and categorization
- Clear risk warnings
- Adherence to Consumer Duty rules aimed at acting in good faith
These rules aim to strike a balance between competitiveness and consumer safety, though it remains to be seen how effective they will be.
Summary: The Future of Crypto ETNs in the UK
The arrival of CoinShares' Bitcoin and Ethereum ETNs signals a new era for crypto assets in the UK. While it presents exciting opportunities for retail investors, it also comes with its share of risks. The upcoming competition among ETN providers could further complicate matters. As we navigate this new landscape, a cautious approach is essential to ensure that innovation doesn't come at the cost of investor protection.
