Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of crypto.news’ editorial.
It’s often said that good regulation should promote disruption, not inhibit it; however, the FCA’s stance towards digital asset ETPs has remained stubbornly conservative and set in its ways for the last decade. As things stand, the FCA currently prohibits UK retail investors from accessing digital assets through regulated, exchange-traded products, ETPs. The reasons cited are well known and can essentially be summarised as the following: challenges related to assessing their true value, high prevalence of cybercrime, extreme volatility associated with these speculative assets that people are poorly equipped to understand, and lastly, there’s no legitimate investment need for cryptocurrencies.
While the aforementioned reasons may have held weight ten or even five years ago, as digital assets enter the mainstream and over 500 million people use them around the world for reasons beyond mere speculation, these arguments look increasingly out of date. For one thing, the criticism that cryptocurrencies are highly speculative and are hard to effectively value applies to many traditional asset classes (early-stage venture capital, art, and commodities) that face comparable challenges when trying to judge their value. However, these are still accessible to retail investors. Often overlooked but no less important is that, unlike the aforementioned traditional assets, cryptocurrencies, particularly those with established utility or monetary properties, such as Bitcoin (BTC), have transparent, auditable supply mechanisms and globally liquid markets that support valuation frameworks based on adoption, scarcity, and usage.
Critics have, since its inception, pointed out how bitcoin and digital currencies can be used for nefarious means. Indeed, my first encounter with Bitcoin came in 2011 when, at GCHQ, I saw it being applied for criminal transfers. While that may have been true over a decade ago, the authorities have cottoned on to its potential use, and illicit activity in cryptocurrency markets has declined and is often more traceable due to the blockchain’s transparency. Major ETPs operate on regulated exchanges with institutional-grade custodians and compliance measures. Cryptocurrency transfers, by definition, leave a signature that can be monitored, unlike suitcases filled with cash, which can be transported without any electronic trace or potential for monitoring.
Alongside their speculative nature, critics cite the extreme volatility associated with cryptocurrencies, while this is undeniably true, volatility exists across many retail-accessible asset classes, such as leveraged ETFs or EM equities. Volatility and its accompanying risks don’t on their own merit exclusion from retail investors, especially when access is through diversified and professionally structured ETPs with transparent risk disclosures.
A fairer and more addressable criticism is the lack of education and understanding on how to invest in these products by retail customers. Without proper knowledge on how to store assets, check accredited exchanges for purchasing assets, and ensure data is properly managed, consumers are vulnerable to scams and errors that can be costly. Investor education should, for this reason, be a regulatory priority, not a reason for exclusion. Many retail investors routinely allocate to complex products (structured notes, options, etc.) under regulated advice or self-direction. Crypto ETPs offer a familiar, regulated wrapper for exposure, simplifying access and removing custody and technical barriers, thereby improving—not reducing—investor understanding. At Bitwise, we currently work with CFA and directly with the allocator community to improve education for both retail and institutional investors.
The final and most used criticism of blockchain technology and cryptocurrencies in general is that it’s a “solution in search of a problem” and that there’s no legitimate investment need. Defining that constitutes a “legitimate need” is highly paternalistic and inconsistent with free-market principles. Retail investors may seek portfolio diversification, long-term growth, or a hedge against monetary debasement—all of which cryptoassets can potentially provide. The demand is clear: UK investors already access crypto through offshore platforms, often at greater risk.
It’s clear that the current status quo from the FCA is untenable; 7 million retail investors/users exist in the UK alone, and they can currently only access offshore platforms and unregulated products where corporate governance and compliance levels vary hugely. This technology has proven itself to be more than just a fad; it is now pervasive throughout every sector and industry globally. Digital Assets and blockchain technology sit at the nexus of multiple mega trends such as the digitisation of money, Agentic AI, energy grid optimisation, and tokenization of real-world assets. Retail investors are right to want to support the Web3 economy and future growth of these markets; the FCA should provide them the guidelines and protection they’re crying out for.
