You could soon be able to invest in bitcoin and other cryptocurrencies with a familiar, regulated investment platform.
The Financial Conduct Authority (FCA) has proposed letting retail (ie regular) investors buy crypto exchange-traded notes, a type of investment product, whereas previously only professional investors could do this.
If approved, it would effectively be the first time UK investors are able to invest in cryptocurrencies with regulated providers, having previously faced a ‘wild west’ in which many fell victim to scammers.
But regulated doesn’t necessarily mean safe, let alone profitable.
Here we explain what crypto ETNs are and the questions you should ask before putting your money in one.
What is a crypto exchange-traded note (ETN)?
An exchange-traded note (ETN) sounds very familiar to an exchange-traded fund (ETF): a now commonplace investment that holds shares in hundreds of companies or other assets, so you can profit from price rises and dividends.
An ETN also attempts to track asset price changes, such as one or more cryptocurrencies. For example, if the price of bitcoin goes up, then your bitcoin ETN could be sold for more than you bought it (minus fees charged by the ETN provider).
But an ETN is more like a bond, in that it’s issued by a company that promises to pay you back when you sell, or hold the ETN to maturity.
So you face two risks: one, that the price of cryptocurrencies falls, and two, that the issuer of the ETN goes bust.
It also means you don’t actually own the underlying cryptocurrency: you just own a debt note from a company.
- Find out more: how to invest in funds
Crypto ETNs vs buying cryptocurrencies directly
You’ve been able to buy cryptocurrencies for many years, but the exchanges that sell and store them are largely unregulated (only money laundering rules apply).
This makes it difficult to find a trustworthy provider, and you have no recourse to the Financial Ombudsman Service if something goes wrong.
In comparison, fully regulated investment platforms have been operating for decades, with very low or, in some cases, no fees. These, along with other FCA-authorised providers, will be the only place you can legally buy crypto ETNs.
John Dobson, head of investment solutions at interactive investor told us the platform ‘welcomes clear regulation in the sector – which will ultimately offer more protection to consumers’. A spokesperson for Hargreaves Lansdown said they ‘will be following the FCA consultation closely’.
Neither platform however confirmed they would enable investors to buy ETNs.
Be warned, however, that while the Financial Services Compensation Scheme will compensate you if your investment platform goes bust, the same doesn’t apply to your crypto ETN issuer.
Another advantage of ETNs is that they can be held in an Isa, ensuring your gains will be tax-free, whereas cryptocurrencies cannot.
- Find out more: best investment platforms in the UK 2025
Not for the faint-hearted
Whatever the advantages of crypto ETNs, they still ultimately invest in cryptocurrencies.
It’s easy to be dazzled by the huge rise in bitcoin prices over the past five years, but don’t overlook the sharp falls that accompanied the rises.
The price of bitcoin and other cryptocurrencies is very volatile, and this can make it a nerve-wracking investment. If you sell in one of the dips, it could cost you dearly.
Plus, there’s no guarantee prices will continue to rise. Unlike with investing in companies, where you can look at fundamentals (is it making money?), cryptocurrency prices are largely driven by sentiment.
Interactive investor’s Dobson told us that ‘digital assets continue to grow in popularity and are increasingly seen as a part of the financial lives of consumers’.
But, he added ‘it’s imperative that retail investors do their research and understand the risks before allocating any part of their portfolio to digital assets’.
Scammers aren’t going anywhere
For every crypto investor whose made a loss, we hear from several who thought they were investing in crypto, but instead had handed their money to a scammer.
Bogus cryptocurrency schemes are prevalent, and scammers may exploit increased consumer confidence resulting from FCA regulation.
Keep in mind that the FCA is only consulting on allowing investors to buy ETNs. The consultation doesn’t close until 7 July, and any rule changes would likely be at least several months after that.
Under its proposal, only FCA-authorised providers can sell ETNs. Don’t take a logo on a website as proof: check yourself on the FCA Firm Checker tool.
Other cryptoasset derivatives, including investment funds that hold cryptocurrencies, remain banned in the UK, so any offer of one is likely to be a scam.
Ways to start investing
If you’re curious about cryptocurrencies – or just want to grow your wealth – there are better ways to do it than putting all of your eggs in one volatile basket.
- Draw up a plan. What are you investing for? How much risk are you comfortable with? Investments should be held for the long-term (5+ years), and so savings accounts may be more useful in the short-term. Having an investment plan can help you keep calm during market dips.
- Mainly buy stocks and bonds. The exact mix of stocks and bonds will depend on your risk appetite. Cryptocurrency-related investments should only be a small part of your portfolio, with money you can afford to lose.
- Diversify. This means spreading your investments across hundreds of assets, to reduce the risk of any one asset failing. An easy way to do this is via an investment fund or investment trust, where the manager picks and monitors the fund for you.
- Use a stocks and shares Isa. This means you won’t have to pay capital gains tax on profits, and dividend tax on dividends. See our Which? Recommended Providers.
