21Shares Advocates for Enhanced Framework on Crypto ETNs
Response welcomes progress but calls for a globally coalescent framework
Recently, 21Shares, a prominent player in the crypto exchange-traded products (ETPs) market, submitted its comprehensive feedback regarding the UK Financial Conduct Authority’s (FCA) Consultation Paper on the future of retail access to crypto exchange-traded notes (cETNs). The FCA’s initiative seeks to lift the existing ban on the sale and distribution of cETNs for retail clients admitted to UK recognized investment exchanges (UK RIEs).
21Shares appreciates the FCA's efforts to open the doors to the UK retail market for cETNs, emphasizing that while progress is commendable, the proposed framework imposes restrictions that may hinder growth and innovation. The organization has suggested a more inclusive approach that resonates with global standards, ultimately empowering UK investors with diversified, well-regulated access to the burgeoning digital asset class.
Key Concerns Highlighted by 21Shares
In their response, 21Shares outlined critical issues that they believe need addressing to enhance the regulatory environment:
Geographic Limitations
One primary concern is the geographic restriction of the proposal, which limits access to cETNs only listed on UK RIEs. This narrow view disregards equivalent products available on overseas regulated venues (ROIEs) and consequently limits the choices available to investors.
Asset Concentration Risks
The proposal also presents asset concentration risks. By allowing eligibility solely on UK exchanges, particularly favoring the London Stock Exchange, where currently only Bitcoin and Ethereum are admitted, the framework could unintentionally drive retail investors toward unregulated alternatives, seeking a wider range of investment opportunities.
Misclassification Risks
21Shares expressed apprehension regarding the classification of UK RIE-listed cETNs as Restricted Mass Market Investments (RMMIs). This classification could lead to reduced market liquidity, stifle innovation, and limit options for investors to diversify their portfolios effectively.
Recommendations for a Final Regime
In light of these concerns, 21Shares has put forward several recommendations to the FCA:
- Recognize and permit regulated cETNs from overseas exchanges (ROIEs).
- Establish a transparent eligibility framework to include a wider array of crypto assets as underlyings for cETNs.
- Ensure that cETNs are classified as Readily Realisable Securities (RRS), distancing them from the RMMIs classification.
Duncan Moir, President at 21Shares, emphasized the importance of a regulatory framework that not only permits retail investors to access digital assets but does so via transparent and credible products. He remarked, "The current consultation is a crucial milestone that underscores the pressing need for a flexible and proactive regulatory environment that aligns with the evolving global crypto market and the diverse interests of investors.”
21Shares is poised and ready to support policymakers with market data and insights, committed to helping the UK establish itself as a competitive and well-regulated hub for crypto investment products.
About 21Shares
21Shares stands as a leading name in the cryptocurrency ETP sector, offering the largest selection of crypto ETPs available. The firm was established to enhance accessibility to cryptocurrency investment, bridging the traditional finance realm with decentralized finance advancements. Notably, 21Shares pioneered the first physically-backed crypto ETP in 2018 and has since maintained a successful track record, providing innovative, straightforward, and economical investment solutions built on solid research and capital markets expertise.
As part of 21.co, an industry leader in decentralized finance, 21Shares continues to pave the way for crypto investment innovations.
Media ContactMatteo Valli
matteo.valli@21shares.com
Frequently Asked Questions
What are cETNs?
Crypto exchange-traded notes are investment products that track the performance of cryptocurrencies, providing an option for investors to gain exposure to digital assets without directly owning them.
Why does 21Shares oppose the geographic limitations?
21Shares believes that restricting cETNs to only UK RIEs limits investment choices for retail clients and overlooks equivalent investment opportunities available abroad.
What are the risks of asset concentration mentioned?
By concentrating cETNs primarily on the London Stock Exchange, retail investors might seek out unregulated alternatives for broader exposure, raising consumer risk.
How does 21Shares suggest classifying cETNs?
21Shares recommends classifying cETNs as Readily Realisable Securities (RRS) to enhance market liquidity and investor access.
What role does 21Shares want to play in the regulatory process?
21Shares wishes to assist policy makers with data-driven insights and contribution to ensure that the regulatory environment supports the growth of the UK crypto market.
