UK Trends and Developments Contributed by: Carolyn Jackson, Nathaniel (Nate) Lalone, Christopher Collins and Ciara McBrien, Katten Muchin Rosenman UK LLP (Katten)
Cryptoasset Derivatives in the UK: A New Dawn? The UK’s approach to cryptoasset regulation has been generally characterised by a significant level of caution. Nowhere is this more apparent than in the approach by the UK regulators to the retail market in cryptoasset derivatives, where a ban has been in place since January 2021. Recently, however, the Financial Conduct Authority (FCA) has begun to reconsider cer - tain aspects of its ban, which raises the possibility that the UK will join other leading jurisdictions in embrac - ing the cryptoasset derivative markets and boosting London’s role as a key financial centre in this sector. History of the FCA Retail Ban on Cryptoasset Derivatives In 2018, the UK’s Cryptoassets Task Force (CATF) – consisting of HM Treasury (HMT), the Bank of Eng - land, and the FCA – published a report setting out the UK government’s comprehensive approach to the regulation of cryptoassets. In the report, the CATF expressed concerns about the risks inherent in cryp - toassets and, as part of the UK’s strategy to mitigate such risks, recommended that the FCA consider a ban on certain types of cryptoasset derivatives and cryptoasset exchange-traded notes (cETNs) for UK retail traders. Following this recommendation, the FCA consulted on such a ban in July 2019, which was then followed by a policy statement (PS20/10) in October 2020 that gave effect to the ban. In PS20/10, the FCA described cryptoassets as hav - ing no intrinsic value and, as a result, could not be reliably valued, especially by retail traders. The FCA also noted that cryptoassets involve heightened risks relating to financial crime, such as money laundering. Concluding that cryptoasset derivatives “do not meet a legitimate investment need”, the FCA rejected argu - ments that existing regulation, or restrictions short of a complete ban, would be sufficient to address the iden - tified risks. The ban on retail access to cryptoasset derivatives and cETNs took effect on 6 January 2021. Subsequent Developments in the Cryptoasset Derivatives Markets In the years since the FCA ban, the market for cryp - toasset derivatives – in particular those traded on exchange – has boomed. For example, the size of the market for cryptoasset exchange-traded funds
(cETFs) has increased significantly following approv - al by the U.S. Securities and Exchange Commission (SEC) for spot Bitcoin funds in January 2024. The sec - tor was also boosted when the SEC exempted stak - ing from the US federal securities laws later that year, which in effect permitted spot Ethereum exchange- traded funds in the United States. To give a sense of the scale of this market, just one cETF – BlackRock’s iShares Bitcoin Trust, also known as IBIT – attracted over USD16 billion in investments in the first half of 2025, taking its overall assets under management to USD83 billion in July 2025. In addition, the underlying spot markets are now characterised by extraordinary depth and liquidity. For example, by late July 2025, the market capitalisation of Ethereum was over USD450 billion, with daily trading volumes regu - larly in excess of USD40 billion. The corresponding narrow bid-ask spreads are compelling evidence of a well-functioning and orderly market. Cryptoasset derivatives have also become signifi - cant markets. For example, the Chicago Mercan - tile Exchange (CME) has offered futures contracts on cryptoasset underlyings since 2019. In addition, both Hong Kong and Australia permit retail traders to access regulated cryptoasset derivatives, as does the European Union following full implementation of the Markets in Cryptoassets Regulation. Sophisticated institutional investors have also begun to treat the cryptoasset derivatives market as a legitimate (and profitable) asset class. In a recent leading cryptoasset trading venue survey of several hundred top execu - tives (ie, C-suite officials who were speaking on behalf of the investments by the firms they lead), nearly 90% have said that they have exposures to digital assets and nearly the same amount have said that they have increased their allocation to this asset class year-on- year, and intend to continue to do so. In light of the significant maturation of these markets – and the ability of retail participants in the United States and several European countries to access exchange-traded cryptoasset products – the FCA’s ban seems increasingly out of step, making the UK a significant outlier.
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