Dominance of UK Crypto ETN Market Intensifies as Retail Access Returns — Issuers Slash Fees to 0.05%

Dominance of UK Crypto ETN Market Intensifies as Retail Access Returns — Issuers Slash Fees to 0.05%

The UK cryptocurrency exchange-traded note (ETN) market is experiencing a fierce price competition after regulators reopened retail access, marking a significant policy shift that has led to drastically reduced fees for crypto investment products.

Key Takeaways

The Financial Conduct Authority (FCA) lifted its ban on retail investment in crypto ETNs as of October 8.
Major issuers have cut fees sharply, with some products now costing as low as 0.05%.
The fee reductions have sparked a competitive environment among leading crypto ETN providers.
Trading volumes have surged since retail access resumed, indicating high investor demand.
The FCA has warned issuers to exercise caution, especially regarding incentives and risk management.

The New Fee Dynamics in Crypto ETNs

A competitive price confrontation has unfolded within the UK's cryptocurrency exchange-traded note (ETN) sector following the reopening of retail investor access after a four-year hiatus.

This regulatory shift has prompted leading issuers to implement significant fee reductions, bringing costs for bitcoin-associated products down to as low as 0.05%. This is even cheaper than the fees typically associated with traditional equity and bond funds.

On October 8, the Financial Conduct Authority (FCA) reversed its ban on retail investment in crypto ETNs, indicating a shift in the regulator’s perspective concerning digital assets.

Retail investors can now purchase and hold London-listed crypto ETNs that track popular cryptocurrencies like bitcoin and ether, utilizing tax-free accounts such as stocks-and-shares ISAs for this tax year. Starting April 6 next year, these products will also be eligible for the Innovative Finance ISA. This decision has sparked fierce competition among issuers.

How Are Issuers Responding to the Fee Competition?

Bitwise was quick to adjust its pricing, lowering the annual fee for its Core Bitcoin ETP from 0.2% to an attractive 0.05% for an initial six-month period, with the prospect of extending this rate indefinitely.

In response, 21Shares cut its fees for both the Core Bitcoin and Ethereum Core Staking ETPs to 0.1%. Fidelity likewise reduced its Physical Bitcoin ETP charges to 0.25%, while Invesco dropped its equivalent fee to 0.1% until the end of 2025.

BlackRock, a significant force in the U.S. crypto ETF arena, has entered the UK market with its European iShares Bitcoin ETP, offering a limited-time discount that lowers fees from 0.25% to 0.15% until January. CoinShares also stands out in the ether market with its Physical Staked Ethereum ETP, boasting no management fees thanks to staking rewards from locked ether.

Will the UK's Crypto ETN Scene Reflect the U.S. ETF Boom?

The current scenario in the UK mirrors the intense competition observed in the U.S. following the launch of crypto ETFs in early 2024.

Analysts suggest these fee reductions might make acquiring bitcoin exposure through regulated funds more economical than through many conventional investment methods.

Despite this momentum, some crypto ETNs that were previously available solely to professional investors still maintain high annual fees of up to 2.5%, illustrating the divide between established products and new, affordable alternatives.

Upon the resumption of retail access, trading activity surged significantly. Data from Bitwise indicates that average daily trading volumes for Bitcoin ETNs on the London Stock Exchange shot up to $7.2 million from just $2.1 million earlier in October, when only professional investors could participate. Ether ETNs registered a similar increase, climbing from $1.9 million to $4.4 million. Morningstar's reports reveal that WisdomTree's Physical Bitcoin and Ethereum ETNs have seen the highest trading activity since their relaunch, closely followed by products from iShares.

“The surge in activity highlights the remarkable appetite for exposure to these digital assets,” remarked Russell Barlow, CEO of 21Shares. Market analysts anticipate that the escalating competition will lead to broader product diversity and further reductions in investor costs as more issuers enter the UK landscape.

FCA Issues Cautionary Guidelines to Issuers

Nonetheless, the FCA has emphasized the need for caution. This week, the regulator warned issuers against enticing investors with incentives and stressed the importance of conducting thorough suitability assessments.

Companies must implement cooling-off periods and provide clear risk warnings, as crypto ETNs are deemed high-risk investments that are not safeguarded by the Financial Services Compensation Scheme.

While platforms like Interactive Investor, Trading 212, Killik & Co., and Interactive Brokers have begun granting retail access, others, including prominent investment brokers Hargreaves Lansdown and AJ Bell, have yet to offer crypto ETNs.

Hargreaves Lansdown has expressed skepticism, advising clients against adding Bitcoin to their portfolios and labeling it “not an asset class.” Despite this stance, the firm plans to enable trading for “appropriate clients” starting in early 2026.

The FCA's recent decision to open the market marks a pivotal moment for the UK's cryptocurrency sector, which has faced criticism for its gradual regulatory advancements.

Recently, the regulator has accelerated the approval process for crypto firms, raising its acceptance rate to 45%, while granting licenses to major institutions including BlackRock and Standard Chartered.

Market research from IG Group indicates that this new retail access might broaden the UK’s crypto investment market by as much as 20%, with nearly one in three adults showing interest in purchasing digital assets through ETNs. Notably, the highest interest is among younger investors aged 18 to 34, who cite regulatory assurance, safety, and tax efficiency as their primary motivators.