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One in three Britons would consider investing in crypto through exchange traded products when the Financial Conduct Authority lifts its ban on the products on Wednesday, according to research.
The UK’s crypto market could grow as much as 20 per cent on the back of the launch of exchange traded products that allow investors to hold it in a regulated way, investing platform IG claims.
The FCA will lift its ban on crypto exchange traded notes, or ETNs, from Wednesday, allowing investors to gain access to digital currencies via products that are traded on stock exchanges and track the price of the asset without investors holding it directly.
ETNs are similar to more common ETFs, in that they are stock market-listed and pool investors’ money to hold assets, but they carry more risk.
ETNs differ to physical ETFs as they do not have to hold the assets they track. Instead, the provider can aim to match the return of the index however they choose.
Around 12 per cent of the people in the UK said they have or have had exposure to crypto assets at the end of last year, according to figures from the FCA, though this figure has likely increased since then, with IG data suggesting some 25 per cent now own cryptocurrency.
A fifth of people said the ability to hold crypto within these tax wrappers would make them more likely to invest in the digital currencies
However, this indicates there could be a significant uplift in crypto ownership from 8 October.
There are 17 crypto ETNs listed on the London Stock Exchange, all of which have been only available for institutional investment over the past year. These include products from WisdomTree, Fidelity and Invesco.
More ETNs are expected to launch after the ban lifts.
IG said younger adults will likely make up the bulk of this interest, with half of quarter of 25s and 49 per cent of 25-to 34-year-olds saying they are interested in buying cryptocurrency.
Michael Healy, UK managing director at IG, said: ‘With ETNs set to launch, we expect a surge in crypto adoption – especially among younger generations already comfortable with digital assets.
‘This could mark the start of a new phase of mainstream crypto investing in the UK.’
He added: ‘Unlike ETFs, which allow investors to directly own underlying assets, ETNs are debt instruments that track the asset’s price, providing regulated access without the need for direct ownership.
‘Although crypto ETFs are more commonly owned globally, they remain banned in the UK.’
ETNs, are a type of exchange traded product, or ETP, that are not backed by the underlying asset – in this case cryptocurrencies.
These products are debt instruments that track the price of the underlying crypto asset, and promise a return based on the asset’s performance.
ETNs are deemed a safer option than holding cryptocurrency directly by 32 per cent of people, but they do come with credit risk.
Crypto ETFs will remain banned in the UK for the time being. The FCA’s fund framework would need to be updated before the ban could be lifted, the FCA said.
The launch of crypto ETNs also means that for the first time in the UK, crypto investors might be able to hold cryptocurrencies within their Isa and Sipp wrappers, meaning that they will be free from tax within the two wrappers’ respective allowances.
In theory these products can be held within these wrappers, but HMRC has so far yet to confirm this. It did not respond in time for comment.
Healy said: ‘HMRC has not formally confirmed that crypto ETNs can be held within Isas or pensions. We expect guidance soon and see no reason why it would not be possible.’
A fifth of people said the ability to hold crypto within these tax wrappers would make them more likely to invest in the digital currencies.
Some 41 per cent of people in total said they were in favour of allowing these crypto ETNs to be held within Isa wrappers, compared with 20 per cent who said it should not be allowed, while 37 per cent supported their inclusion in pensions, versus 21 per cent against.
Healy said: ‘Crypto ETNs represent a significant step forward for the UK market, opening access to millions of investors who have previously been cautious or excluded
‘Holding crypto ETNs in tax-efficient wrappers like Isas and pensions would be a major milestone for UK retail investors, allowing gains to grow tax-free or tax-deferred and simplifying reporting.’
‘That said, ETNs are just one part of the puzzle. 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.
‘It’s also crucial that the government considers allowing crypto ETFs, which are currently banned in the UK but offer greater flexibility and liquidity.’
In recent days, the price of bitcoin has hit another record, surpassing $125,000 a coin.
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This article was originally published by a www.dailymail.co.uk . Read the Original article here. .