XBT Provider Parent Company CoinShares Responds to Incoming FCA Ban for Crypto Derivatives and ETNs

Europe’s largest digital asset manager assures investors that its products will continue to operate as normal as UK regulator goes against the grain with blanket ban for regulated products.

October 07, 2020 – The team behind the XBT Provider ETPs, CoinShares, have generally been excited by recent regulatory developments in digital assets, which have laid the foundation for wider adoption. In the US, the OCC approved digital assets for custody by U.S. banks, allowing digital asset providers to obtain banking licenses. In Europe, the European Commission proposed a uniform regulatory regime for digital assets in the form of ‘MiCA’, which will see digital assets regulated in the same manner as a number of more established asset classes.

It is in this context that we have read the FCA’s publication of rules banning the distribution of derivatives and ETNs that reference digital assets to UK retail investors. We believe that the FCA ban sets it squarely against the recent, far more positive developments in the digital assets industry mentioned above. 

We were extensively involved in the FCA consultation process and had several meetings with the FCA to dissuade them from banning the distribution of ETNs that reference digital assets to UK retail investors. CoinShares and many other industry participants put forward a number of arguments as to why such a ban would be ill-advised and would not benefit retail investors.  We note that the FCA ban on unleveraged ETNs will not result in the proposed savings and benefits; rather, it will drive UK retail investors to unregulated crypto exchanges, which, as the FCA itself admits, have far fewer protections than the regulated ETNs offered by CoinShares and other providers.

We see the FCA ban as further evidence that the UK is turning its back on innovation in digital assets and on regulatory coordination with other jurisdictions. It remains the only Western jurisdiction to ban digital assets based on the false belief that they have “no intrinsic value."  

We note that the FCA explicitly states that it will not require divestment or force retail investors to sell ETNs that reference digital assets. We recommend that UK based investors speak to their brokers or advisors for additional information as to how such products will be treated in specific circumstances.

Finally, we want to reassure our investors that we will continue to support and operate our products as normal. At CoinShares, we have a broad and diversified client base across a number of jurisdictions and our business strategy is to maintain that diversification and not become reliant on any single country. We remain excited about the future of digital assets and the part they have to play in investment portfolios and will continue to design and launch products and services for our global investor base.