The UK crypto market could grow by as much as 20% following the launch of crypto Exchange Traded Notes (ETNs), with retail investors taking advantage of a major regulatory shift.

According to the crypto trading platform, a staggering 30% of UK adults would consider investing in crypto via ETNs, investment products that track the price of an asset without requiring investors to hold it directly.

Unlike stocks or Exchange-Traded Funds (ETFs), which allow investors to directly own underlying assets, ETNs don’t hold investments, but promise to pay returns based on an asset’s performance, making them sensitive to market movements. 

Today (8th October) marks a pivotal change in UK law for these high-risk investments, with the FCA officially opening access to retail investors to purchase crypto ETNs, allowing investors to access digital currencies through stock exchange-traded products that mirror asset prices.

If IG’s polling is to be believed, this could trigger a surge in investor interest, particularly among younger adults, with 50% of 18-24-year-olds and 49% of 25-34-year-olds expressing some interest in crypto ETNs.

Among those likely to invest, the main appeal of crypto ETNs is their perceived safety and regulatory oversight, cited by 32%, while a further 19% point to the ability to hold crypto within tax-efficient wrappers such as ISAs and SIPPs as a key advantage.

Although HMRC has not yet confirmed if crypto ETNs could be held in this way, IG found that support for including crypto within tax wrappers is strong, with 41% backing its inclusion in ISAs, and 37% supporting its inclusion in pensions.

The FCA has only recently lifted its 2021 ban on the sale, marketing and distribution of crypto ETNs to retail investors (though the ban on retail access to cryptoasset derivatives remains in place), with the regulator keen to bolster the UK’s burgeoning crypto industry.

Figures from 21Shares, a Zurich-based fintech focused on crypto trading, show the UK could see over $30 billion in fresh investment if just 1.3% of its population adopts crypto ETNs, a threshold already met in the US.

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“To fully unlock crypto’s potential, the UK needs a proper regulatory framework – and it needs it fast, or we risk falling far behind global peers,” said Michael Healy, UK managing director at IG.

“It’s also crucial that the Government considers allowing crypto ETFs, which are currently banned in the UK but offer greater flexibility and liquidity.”

For its part, the Government claims to recognise the potential for economic growth in opening up crypto investments.

In a move designed to boost investor confidence and protect consumers, the Chancellor, Rachel Reeves, earlier this year revealed draft legislation for regulating cryptoassets, bringing crypto exchanges, dealers, and agents into the regulatory perimeter.