21st October 2025 > > The UK.

tl;dr

The UK makes its first ever crypto-positive decision, which is as surprising as it is welcome.

Market Snap

Market Wrap

The crypto market rally reversed overnight, probably because the new deal for rare earths between the US and Australia ramps up the risk that Trump might go through with the extra tariffs reserved for China.

Curious Cryptos’ Commentary – The UK

Blow me down with a light feather, the UK has made a crypto-positive decision. Quite extraordinary.

Before we dig into the details, perhaps a bit of terminology and some definitions might help.

ETFs – exchange traded funds. These are the products which have driven BlackRock’s dramatic growth to become the largest (passive) investment manager in the world. Structured to trade like stocks on regulated exchanges, ETFs must be physically backed with the underlying, held at a regulated and insured custodian. Note that the issuer of the ETF has no exposure to the performance of the ETF or the underlying asset, it does not own the underlying asset, and nor does it custody the underlying asset. The issuer is merely marketing the ETF. So, when you read that BlackRock owns 800,000 BTC equating to 4% of total supply, you can tell everyone that this claim is utter nonsense. BlackRock owns precisely zero BTC. Investors in BlackRock’s ETF are the legal owners of the BTC held in custody at Coinbase. There are no cryptos on BlackRock’s balance sheet.

ETNs - exchange traded notes. Traded on regulated exchanges, ETNs are widely different to ETFs. They are issued as a bond with inherent credit risk to the issuing entity. ETNs do not hold the underlying, there is simply a promise to pay out the commercial return of the underlying during the bond’s lifetime. Hedging is normally done using derivatives. ETNs tend to be very illiquid, trading on esoteric exchanges such as the Luxembourg exchange. Quoted prices have wide bid-offers and are not binding. In general, you should never buy an ETN, especially if you do not intend to hold it to maturity.

ETPs – exchange traded products. This category includes both ETFs, ETNs, and all other financial products traded on an exchange. If the product is not an ETF or an ETN, its structure will take on some of the characteristics of either or both. The more it looks like an ETF, the better it is.

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After much consultation and dithering, the FCA has lifted the ban on UK retail investors buying cETNs (crypto exchange traded notes). David Geale, executive director of payments and digital finance at the FCA, explained:  

“This consultation demonstrates our commitment to supporting the growth and competitiveness of the UK’s crypto industry. We want to rebalance our approach to risk and 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.”

You can hear the gritted teeth through which Geale made that statement.

Bearing in mind my comments above, this might not seem to be a particularly useful development. But there is a further wrinkle. UK ETNs have a specific quirk that does not apply globally – they must be backed with the underlying. In effect, a UK ETN is very much a hybrid product, helping to bridge the gap to ETFs.

HMRC has also got into the act, allowing for cETNs to be held within ISAs or your pension, though now that pension assets on death are taxed at up to 70% no-one is going to be saving into them for much longer:

https://www.gov.uk/government/publications/tax-treatment-of-cryptoasset-exchange-traded-notes/tax-treatment-of-cryptoasset-exchange-traded-notes-policy

First out of the gates with a UK cETN is of course BlackRock. However, you are probably not going to be able to invest in cETNs anytime soon. The FCA only recently started reviewing the prospectus, the LSE is still debating internally on how to administer the trading of the cETNs, and your online ISA/pension provider is going to be wary about offering these new products, given the heightened compliance concerns. Certainly, if you are a Vanguard customer, you are right at the back of the queue.

Harvey Knight, partner and head of the UK financial services regulatory team at Withers, has his own opinion:

“The delay is not necessarily a mere operational blip but quite symptomatic of how the UK has handled its approach to crypto and digital assets more generally.”

Harvey has called it right.

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But let’s not be churlish.

This development is undoubtedly a key indicator that the UK’s traditional antagonism towards cryptos and the crypto revolution is thawing. In an ideal world, the FCA would allow retail investors to buy spot ETFs issued in the US, but it refuses to do so, on rather spurious grounds in my opinion. However, cETNs that hold actual BTC in a tax-free wrapper is a fine concept. Maybe within a couple of months, we can all be furiously investing in BTC with no self-custody risk, and no CGT to pay.

That sounds good to me.