[co-author: Emma Bartlett]
Following the UK Financial Conduct Authority's (FCA) decision to lift its 4-year ban on 8 October 2025 on offering cryptoasset-backed exchange-traded notes (cETNs) to retail investors in the UK, a steady stream of market participants have been looking to take advantage of this policy shift. Whilst this reversal opens the door for broader cETN product offerings, issuers wanting to offer to retail investors need to navigate complex rules as the FCA has classified cETNs as Restricted Mass Market Investments (RMMIs). This article explores the key UK regulatory requirements that market participants need to think about, including in relation to the financial promotions regime and the UK Consumer Duty framework, and sets out some practical steps to achieving retail listings.
In a significant regulatory development, the FCA lifted its 4-year ban on offering cETNs to retail investors in the UK, effective from 8 October 2025. This policy shift reflects the FCA’s evolving stance on cryptoasset regulation and presents new opportunities for issuers to expand their product offerings in the UK retail market. For background see our previous alert: UK: FCA updates position on cryptoasset-backed Exchange Traded Notes.
Despite the relaxation of the restrictions, the FCA continues to focus on the balance between innovation, consumer protection and market integrity. In particular, the FCA has classified cETNs as RMMIs under the UK’s financial promotion regime, meaning that firms that usually issue structured notes, depending on the role performed throughout the manufacturing-distribution chain, will need to proactively assess and plan for compliance with certain additional regulatory requirements (including enhanced consumer protection obligations and stricter financial promotion rules). In addition, cETNs will need to be traded on an FCA recognised investment exchange (RIE), which includes the London Stock Exchange plc (LSE), and comply with the rules of that RIE. As a result, entities will need to engage with both the FCA and the LSE to ensure full compliance on both the regulatory and listing fronts.
LSE requirements for cETNs
By way of recap, specific LSE requirements remain in place in relation to all cETN issuances which can be found in their factsheet and include the following:
- physically-backed (non-leveraged) structures must be used;
- only Bitcoin and Ethereum constitute eligible underlying; and
- all underlying must be held in cold storage by a custodian who is itself subject to AML regulatory regime in the UK, EU or a number of other specified jurisdictions.
The opening of access to retail has not changed any of these specifics – it has also not prompted a loosening of the requirements for offerings to institutional investors – despite the fact that listing requirements are currently more open on a number of EU RIEs, for example. The UK has not made any move to match that offering at this time.
Admission to trading and prospectus disclosure requirements
Since the FCA requires cETNs to be admitted to trading on an RIE, issuers will need to prepare and submit a prospectus to the FCA that is compliant with the Prospectus Rules: Admission to Trading on Regulated Market sourcebook (the PRM) under the Public Offers and Admissions to Trading Regulations 2024 (POATRs). Given the fact that cETNs are generally evergreen products, it may make sense for issuers to put in place a base prospectus that gets renewed annually. As for other structured products, the prospectus must be fair, clear and not misleading, containing all the information necessary for an investor to make an informed investment decision. By way of reminder, the POATRs have introduced a single disclosure regime for non-equity securities, removing the distinction between the previous “retail” and “wholesale” disclosure regimes and the preparation of a summary for the admission to trading of non-equity securities is no longer required. For further information on the POATRs, please see our previous alert: New UK public offers and admissions to trading regime in force from 19 January 2026.
Financial Promotion Rules
Whilst the FCA has acknowledged that the cryptoasset market has matured, cETNs are still viewed by the FCA as high risk, potentially speculative, products. Given the inherent structural complexity and potential exposure to greater volatility (as a result of the nature of the underlying assets compared to others), entities promoting cETNs must adhere to the strict financial promotion rules for RMMIs, including the requirement that all financial promotions and client communications must include prominent warnings.
As a result, authorised firms offering cETNs directly to retail investors must ensure that all relevant information—especially risk disclosures—is presented clearly and prominently. It is not enough to provide well-balanced information to retail investors; the way that information is displayed must also support informed decision-making.
This includes:
- clearly outlining the risks of loss and volatility;
- banning all promotional incentives that could unduly encourage retail investors to invest in RMMIs (with narrow exceptions);
- disclosing all fees, charges and costs associated with the investment; and
- presenting complex product features in a way that is accessible to retail investors, including those with limited financial experience.
Accordingly, promotional materials should be presented in a way that is easy to understand and all supporting information should be accurate and up to date. In particular, the FCA guidance on cryptoasset financial promotions (which category includes promotions relating to cETNs) recommends including clear and prominent disclosure of the arrangements in place in respect of the legal or beneficial ownership of the cryptoasset. In addition to the core requirements of the financial promotions regime, authorised firms must also comply with additional obligations. These include:
- providing a 24-hour cooling-off period for first-time investors; and
- conducting appropriateness assessments (in execution-only or non-advised scenarios) to determine whether the investor has sufficient knowledge and experience to understand the specific type of cETN being offered.
When marketing cryptoassets (including cETNs) to UK consumers on their websites, firms must implement clear, prominent and personalised risk warnings via pop-up messages that appear before any transaction can proceed. These pop-ups are intended to disrupt the user journey and force individuals to actively acknowledge the potential risks of investing, particularly for retail investors, who may not otherwise possess adequate experience or understanding of these investments.
These measures are designed to ensure that retail investors are not only protected but also empowered to make well-informed decisions about engaging with cETNs.
In addition, any manufacturer or distributor offering cETNs to retail clients will need to ensure compliance with the relevant product governance rules, including clearly defining the product target market.
Consumer Duty
As cETNs are now classified as RMMIs, firms will need to have regard to consumer duty rules and ensure that they are acting in good faith, avoiding foreseeable harm and supporting retail clients in making informed decisions to the extent that direct action is undertaken.
Authorised firms should ensure that information, including that in relation to product structures and disclosure, avoids unnecessary complexity and is presented in a way that supports transparency, accessibility and responsible investment decision-making.
In addition, cETNs must not exaggerate potential returns or understate the risks of volatility and loss. Instead, firms are expected to provide clear, evidence-based justification for any advertised rates of return. Forecasts of future performance should be based on reasonable assumptions and supported by objective data.
Practical considerations
There are also several practical considerations to think about when contemplating the issuance of cETNs to retail investors in the UK. We have set out below some of the issues we have come across when working on these issuances.
- Non-UK issuer - if the issuer is incorporated outside the UK, early engagement with relevant foreign authorities and local counsel, especially if a cross-border offering is contemplated, is advised to confirm whether the proposed offering triggers any domestic authorisation, notification or prospectus approval requirements for the issuer that could impact overall intended timelines.
- Documentation – consider whether existing documentation can be adapted for retail use or whether additional, retail-focused documentation might be required or advisable. Particular attention should be given to risk factors to ensure that they are drafted with clarity, legibility, avoiding overly legal language and tailored to a retail audience, as they will receive special scrutiny from the FCA during the review and approval process.
- Distribution channels – establish which entities will be acting as the manufacturer and/ or distributors and ensure compliance with applicable authorisation and product governance rules.
- Redemption mechanics — these should be described in a way that is readily understandable to retail investors, including any procedural steps, timing, risks and associated costs and charges. This is particularly the case where an authorised participant is involved and/or physical delivery of the underlying is contemplated.
- Timing – establishing realistic timing expectations, including an overview of the entire approval process is advisable. For example, failure to respond to rounds of document comments within specified periods will lead to review processes being put on hold and failure to properly integrate any overseas processes (as mentioned above) may give rise to unwanted delays. In addition, a clear understanding of the order of final sign offs (with supporting documents and fee payments made at relevant times to avoid delays and process re-starts), is essential for approval and listing success.
What do these rules mean for issuers of cETNs?
While the RMMI requirements are well-established within the financial promotions regime and consumer duty framework, the volatility of cETNs and the way in which the underlying assets are held and managed introduce further challenges. Issuers must take additional care to ensure that retail-facing products are appropriately structured and communicated to meet both regulatory expectations and the needs of a less sophisticated investor base.
Final thoughts
The FCA's more open stance on cETNs is being welcomed by banks, investment firms, other regulated firms and even smaller players who are keen to gain broader exposure to the cryptoasset-linked market. That said, although the FCA’s decision to permit retail access to cETNs presents a strategic opportunity for investment firms, any such offers require careful planning. Firms will need to consider if adjustments to their operations, marketing or governance frameworks are required to meet the expectations of both regulators and retail investors.
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