UK Trends and Developments Contributed by: Carolyn Jackson, Nathaniel (Nate) Lalone, Christopher Collins and Ciara McBrien, Katten Muchin Rosenman UK LLP (Katten)
Subsequent Developments in the United Kingdom In parallel with the significant expansion of the cryp - toasset derivative markets, the last several years have seen a number of developments in the United King - dom relating to cryptoasset regulation. Principally, the UK has taken meaningful steps to bring cryptoasset services and activities within the regula - tory perimeter. The Money Laundering Regulations (MLRs) have been amended to impose registration requirements on cryptoasset exchange and custodian wallet providers, along with requirements to ensure appropriate know-your-customer and anti-money laundering arrangements are in place for such firms. In 2023, the FCA incorporated certain cryptoassets into the UK’s financial promotion regime to ensure that any marketing activities in respect of such cryptoassets are “fair, clear and not misleading”, amongst other requirements. In addition, in October 2023, HMT set out proposals for establishing a regulatory regime for cryptoassets and stablecoins. A draft statutory instrument giv - ing effect to this new regime was published in April 2025, and was swiftly followed by three FCA discus - sion papers on a variety of cryptoasset topics. One such discussion paper addressed the regulation of, among other things, cryptoasset trading platforms and intermediaries, as well as lending and borrow - ing of cryptoassets and staking activities. The other two addressed the regulation of stablecoin issuance and cryptoasset custody, respectively. Therefore, not - withstanding the UK’s initial caution around cryptoas - sets exemplified by the CATF report, the UK is now moving swiftly to establish a comprehensive regime to regulate and supervise activities in the cryptoasset markets. Separately, the new Labour Government has embarked on an ambitious “growth mission”. HMT has designated the financial services sector as a key part of this growth agenda and has committed to securing the UK’s ongoing competitiveness in finan - cial services. For its part, the FCA’s new 5-year plan focuses on supporting growth in the financial servic - es sector, including supporting those with new ideas for the market. The Chairman of the House of Lords Financial Services Regulation Committee recently
emphasised the importance of innovation and growth in the UK’s financial services sector, stating that the FCA must “do more to remove, or mitigate at the very least, anything that makes the UK a less attractive place to do business”. The combination of the embrace of cryptoasset regu - lation and the need to drive economic growth in the UK may have opened the door to a relaxation of the FCA’s ban on retail access to cryptoasset derivatives. New Proposals to Permit cETNs for UK Retail Investors In its most recent Quarterly Consultation published in June 2025, the FCA proposed to lift the retail ban on trading in cETNs, subject to certain conditions. The FCA subsequently confirmed that the ban would be lifted with effect from 8 October 2025. The fact that cETNs are the first to benefit from the FCA’s newfound openness to cryptoasset derivatives is not entirely surprising, as the FCA acknowledged in PS20/10 that cETNs generally present fewer risks to retail investors than other cryptoasset derivatives. Moreover, in March 2024, the FCA permitted UK exchanges – known as recognised investment exchanges (RIEs) – to make cETNs available to professional investors only. Nev - ertheless, the retail ban remained in place. In the Quarterly Consultation, the FCA referred to the regulatory and legislative developments that have occurred since the ban was proposed and imple - mented in the late 2010s, in particular the use of the MLRs and the financial promotions regime to limit the scope for financial crime and to protect consumers. The FCA also acknowledged that, notwithstanding the retail ban on cryptoasset derivatives, UK retail inves - tors can gain exposure to spot cryptoassets and other types of crypto products. The FCA then went on to note that, for purposes of consistency in regulatory treatment across dif - ferent cryptoasset product types, and to reflect the changes in the market for these products, the FCA is considering whether to permit retail trading in RIE- listed cETNs. The FCA stressed, however, that such cETNs would be classified as “restricted mass mar - ket investments” and therefore subject to stringent obligations in terms of marketing activities. The FCA’s
118 CHAMBERS.COM
Powered by FlippingBook