The UK's encryption asset policy has entered a new phase, with a dual approach of lifting bans and implementing reforms.

Recently, the UK's Financial Conduct Authority (FCA) announced the end of a multi-year retail investment ban on exchange-traded notes (ETNs) for cryptocurrency assets, allowing retail investors to purchase Bitcoin, Ethereum, and other cryptocurrency ETNs on regulated securities exchanges.

Cryptocurrency asset ETN is an exchange-traded note linked to cryptocurrency assets and is a type of ETF tool. Essentially, they allow investors to gain exposure to cryptocurrency assets through regulated exchanges.

This policy change will take effect on October 16, 2025, and platforms such as the London Stock Exchange will begin trading the corresponding products after approval. According to regulatory requirements, the encryption assets ETNs listed on the London Exchange must be fully backed by physical Bitcoin or Ether, and leverage is not allowed.

The FCA stated that the market has matured, providing more investment options for eligible retail clients while protecting investors. According to a consumer survey by the UK's Financial Conduct Authority (FCA), as of 2024, about 12% of UK adults hold crypto assets. Despite this lifting of the ban, the FCA made it clear that the retail ban on crypto derivatives trading will remain in place to control risks.

As a supporting measure, the UK tax authority (HMRC) stated in its policy document that such qualified encryption assets ETNs can be included in registered pension accounts from October 8, 2025, and can be held tax-free; from April 6, 2026, such products will be classified under the Innovative Finance ISA (IFISA) investment category, continuing to enjoy tax benefits.

According to a report by the UK government, the total amount of Individual Savings Accounts (ISAs) held by UK residents is approximately £872 billion. Conservatively estimated, if 1% of this funding flows into cryptocurrency ETNs, it could lead to over £8 billion in new investments. Industry analysts believe that the new policy is expected to activate the demand for funds that were previously stagnant due to regulatory restrictions, encouraging around 12 million cryptocurrency holders in the UK to allocate a portion of their assets into pension and other long-term investment accounts.

Bradley Duke, the European director of the well-known asset management firm Bitwise, stated that this move "holds significant positive meaning" and will release retail funds that have been on the sidelines since 2021, helping the UK maintain its position as the largest investment market in Europe.

In contrast to the open attitude of regulators, the UK's major retail investment platform Hargreaves Lansdown still maintains a cautious warning stance towards crypto assets. The company emphasized in its statement that while Bitcoin prices have risen in the long term, they are accompanied by extreme volatility, and it lacks intrinsic value, stating that "Bitcoin is not an asset class" and therefore should not be regarded as a core component of an investment portfolio.

Hargreaves Lansdown pointed out that there are cases of "extreme losses" in the historical performance of cryptocurrencies, making it difficult for investors to establish reliable performance expectations and not being able to rely on it as a means to achieve growth or returns. However, the company also acknowledges that some clients have speculative demands and plans to gradually provide ETN trading services supported by physical Bitcoin and Ether, listed on the London Stock Exchange, to clients who pass compliance risk assessments starting in early 2026. According to regulatory requirements, these clients' cryptocurrency investment exposure will be limited to 10% and will undergo detailed risk warnings and appropriateness reviews before trading.

The pace of digital reform is accelerating. In addition to lifting the investment ban on ETN, the UK government has recently accelerated the construction of digital financial infrastructure. The "Wholesale Financial Markets Digital Strategy" released in July this year clearly states the goal of achieving the "tokenization" of traditional financial assets through blockchain technology, fundamentally transforming the existing manual and paper-based processing workflows.

The strategy points out that the "tokenization" of assets is expected to achieve a qualitative change in market efficiency, such as improving transparency and reducing operating costs through real-time sharing of transaction data. To promote the electronicization of securities certificates, the government has established the "Dematerialized Market Action Working Group" (DEMAT) to coordinate the abolition of physical stock certificates; at the same time, it has launched the construction plan for the digital national debt platform (DIGIT), allowing institutions to issue government bonds through blockchain.

Lucy Rigby, the Economic Secretary to the Treasury of the UK, announced at the London Digital Assets Week that a position of "Digital Market Pioneer" will be established, to be filled by an industry leader appointed by the government, responsible for coordinating the Bank of England, the Treasury, and the FCA among other institutions to promote the blockchainization of financial markets and the tokenization of assets. Industry insiders believe that this role will be an important catalyst for reaching consensus between regulators and market participants, accelerating innovation.

Analysis indicates that compared to the European Union, which has already launched the "Markets in Crypto-Assets Regulation" (MiCA), the UK still needs to quickly clarify the regulatory positioning of new asset classes like stablecoins. David Geale, Executive Director of the UK FCA, stated: "Since we restricted retail investors from trading crypto asset notes, the market has matured. We have provided consumers with more choices while ensuring that necessary protections are in place."