The UK government has made a significant announcement, allowing investors to include cryptocurrency ETPs within tax-advantaged individual savings accounts (ISAs) and pension funds. This decision comes alongside the Financial Conduct Authority’s (FCA) recent lifting of its ban on retail investors purchasing crypto ETPs, although retail access is expected to remain limited for the time being due to regulatory delays. New Regulations Allow Crypto ETPs In ISA Starting from April 6, 2026, crypto exchange-traded notes (ETNs) will be classified as qualifying investments for the Innovative Finance ISA, a type of ISA that has seen limited consumer uptake and is not protected by the UK’s Financial Services Compensation Scheme. This shift is a crucial step towards normalizing digital assets within traditional investment frameworks, according to Dovile Silenskyte, director of digital assets research at WisdomTree, issuer of crypto ETNs. Silenskyte emphasized that this development allows investors to engage with digital assets through established, tax-efficient structures that are typically reserved for conventional investments. Russell Barlow, CEO of 21Shares, Europe’s largest provider of crypto ETPs, highlighted the growing demand among retail investors for exposure to cryptocurrencies. However, he also expressed concern that relegating crypto ETPs to the lesser-known Innovative Finance ISA sends an unfavorable message about their perceived risk compared to traditional assets. Critics Question UK Government’s Crypto Policy Critics of the government’s approach, including Jason Hollands, managing director at Evelyn Partners, have pointed out the “inconsistencies” in the policy. He noted that while a person could convert a large stocks-and-shares ISA into crypto ETNs this year, subsequent conversions would be limited to “a small group” of investors already familiar with Innovative Finance ISAs. This has raised eyebrows, particularly given that only 10,000 individuals subscribed to these accounts in the 2023-24 tax year—a stark decline from the previous year, and a mere fraction of the 15 million ISAs opened during the same period. Her Majesty’s Revenue and Customs (HMRC), the UK government department responsible for tax collection, has indicated that it will keep the situation under review. This could potentially allow crypto ETFs to be included in stocks-and-shares ISAs as the market evolves and public understanding of digital assets increases. In addition to ISAs, investors will also be able to incorporate crypto ETNs into self-invested personal pensions (SIPPs), benefiting from tax relief on contributions and investment growth. Currently, there are 17 crypto ETPs listed on the London Stock Exchange. However, even with the FCA’s ban lifted, platforms like Hargreaves Lansdown have announced that crypto ETNs will not be available for several months, pending the development of a client journey and suitability assessments for retail investors. Amidst this, Hargreaves Lansdown has reiterated its cautious stance, suggesting that cryptocurrencies like Bitcoin (BTC) should not be relied upon as a fundamental asset class for achieving financial goals. Similarly, AJ Bell, the second-largest investment platform in the United Kingdom, has indicated a commitment to offering crypto ETPs, though not immediately following the ban lift. Featured image from DALL-E, chart from TradingView.com
