The UK Opened the Door to Crypto ETNs — Then Closed It Through the Tax System
Earlier this year, the UK took a notable step toward bringing digital assets closer to mainstream financial markets. The Financial Conduct Authority confirmed that retail investors would once again be able to access crypto exchange-traded notes (ETNs), reversing a ban that had been in place since 2021.
Following a consultation launched in June 2025, the FCA formally lifted restrictions on retail access to certain crypto ETNs listed on recognised UK investment exchanges, with the change taking effect on 8 October 2025. For the first time in four years, UK investors could gain exposure to digital assets through regulated exchange-traded instruments rather than having to buy and store cryptoassets directly.
Yet almost immediately, another arm of government introduced a policy that directly undermines that progress.
Around 15 million Britons invest through ISAs each year, making them one of the central pillars of the UK’s savings system. Yet the structure HMRC has chosen for crypto ETNs is used by only a tiny fraction of investors — representing well under 1% of ISA users.
The result is a growing disconnect at the heart of the UK’s approach.
When the FCA’s change took effect, HMRC confirmed that crypto ETNs would initially qualify as eligible investments within Stocks and Shares ISAs, allowing investors to hold them inside the UK’s primary tax-advantaged investment account. However, this treatment will only apply temporarily. From 6 April 2026, crypto ETNs will instead be eligible only under the Innovative Finance ISA (IFISA), removing them from the Stocks and Shares ISA wrapper.
Investors who already hold crypto ETNs inside ISAs will not be required to sell them. HMRC has said forcing investors to unwind existing holdings could risk market disruption.
At first glance, the policy formally preserves tax-advantaged access. In practice, however, it creates a clear mismatch in how these products fit within the UK’s investment ecosystem.
Understanding why that matters requires looking at the role these products play in modern financial markets.
Why exchange-traded crypto products exist
Crypto exchange-traded notes are sometimes misunderstood as simply another way to speculate on digital assets. In reality, they play an important role in bridging traditional financial markets and the crypto ecosystem.
Buying and storing cryptoassets directly requires investors to manage wallets, private keys and custody arrangements. While many experienced crypto users are comfortable with these processes, they introduce operational complexity and security risks that some investors prefer to avoid.
Exchange-traded products provide an alternative. By holding crypto exposure through a listed instrument traded on a recognised exchange, investors can access the asset class through standard brokerage accounts alongside equities, funds and other exchange-traded securities.
This approach allows investors to gain exposure to digital assets without navigating crypto exchanges or managing wallets and private keys. It also enables digital asset exposure to be integrated into portfolio management tools, institutional custody arrangements and tax-advantaged savings vehicles.
For many investors, the choice is therefore not simply between buying crypto directly or ignoring the asset class entirely. Instead, it is between holding crypto exposure through traditional financial infrastructure or through self-custody in the crypto ecosystem.
A global shift toward exchange-traded crypto exposure
The growth of these products is not limited to the UK. Across global markets, exchange-traded structures are rapidly becoming one of the primary ways investors gain exposure to digital assets.
In the United States, the approval of spot Bitcoin exchange-traded funds in January 2024 marked a major milestone in the integration of digital assets into traditional financial markets. Since then, these products have attracted tens of billions of dollars in assets and become one of the fastest-growing ETF categories in history.
BlackRock’s iShares Bitcoin Trust ETF alone has accumulated tens of billions of dollars in assets, while US spot Bitcoin ETFs collectively now hold more than one million bitcoin, making them among the largest institutional holders of the asset globally.
The expansion has not stopped with Bitcoin. Spot Ethereum ETFs followed in 2024, and asset managers are increasingly exploring structures that integrate blockchain-native features such as staking rewards.
Taken together, these developments illustrate a clear direction of travel: exchange-traded structures are becoming the primary way many investors gain exposure to digital assets through regulated financial markets.
At a moment when global markets are integrating digital assets into mainstream investment infrastructure, the UK risks doing the opposite — permitting access in principle while limiting it in practice.
The ISA mismatch
This mismatch becomes clearer when looking at how crypto ETNs are treated within the UK’s ISA framework.
Individual Savings Accounts are one of the central pillars of the UK’s retail investment system. ISAs allow savers to invest up to £20,000 per year without paying income tax or capital gains tax on investment returns.
For millions of UK investors, Stocks and Shares ISAs are the primary way long-term savings are invested in equities, funds and exchange-traded products. Removing crypto ETNs from this framework therefore has practical consequences for investor access.
The government’s decision to move these products into the Innovative Finance ISA creates a structural mismatch between the investment and the wrapper designed to hold it.
The IFISA was originally created to support peer-to-peer lending platforms rather than exchange-traded securities. As a result, the ecosystem of providers supporting IFISAs is fundamentally different from that of mainstream investment accounts.
Most retail investors access exchange-traded products through brokerage platforms offering Stocks and Shares ISAs. Those same platforms typically do not offer IFISA accounts, while IFISA providers generally specialise in lending investments rather than listed securities.
In practice, the challenge may be even more fundamental. As reported by the Financial Times, no UK platform currently offers both crypto ETNs and Innovative Finance ISAs within a single, accessible investment environment. This means investors may have no practical way to hold these products within the wrapper at all.
Even where access exists in theory, it may not exist in practice.
The scale difference between the two ISA types highlights the issue. Around 15 million Britons subscribed to an ISA in the 2023–24 tax year, making it one of the most widely used investment structures in the UK.
By contrast, Innovative Finance ISAs are used by only a tiny fraction of investors, representing well under 1% of ISA users.
Even among the limited number of authorised IFISA providers, there is currently no clear market infrastructure to support crypto ETNs within these accounts.
In effect, the policy does not simply redirect investors into a different ISA structure — it removes them from the one most widely used.
A broader policy challenge
This disconnect reflects a broader policy challenge: how to integrate digital assets into mainstream financial infrastructure without pushing investors outside it.
“ISAs are one of the simplest and most transparent investment structures we have in the UK. Removing crypto ETNs from Stocks and Shares ISAs doesn’t reduce demand for crypto exposure — it simply pushes investors toward offshore platforms or unwrapped holdings. If the goal is investor protection, the focus should be on education and clear risk disclosure, not excluding these products from mainstream investment wrappers.” — Robin Thatcher, By The Book Accountancy
Demand for digital asset exposure is unlikely to disappear simply because the tax wrapper changes. Restricting access through mainstream savings structures may instead encourage investors to seek exposure through less transparent channels.
HMRC has justified the decision on the basis of the “innovative nature” of crypto ETNs and the fact that the market remains relatively new, adding that the policy will remain under review with the possibility of allowing these products within Stocks and Shares ISAs again in the future.
The government also emphasises that it does not mandate ISA providers to offer specific products. Whether IFISA providers choose to support crypto ETNs — or ETN issuers choose to offer IFISAs — is ultimately a commercial decision for firms.
A more coherent approach
The issue, however, is not access, but usability.
If the FCA has determined that crypto ETNs can be made available to retail investors within the UK’s regulated market infrastructure, it follows that those same products should be able to sit within the country’s primary retail investment wrapper.
“Where financial products are permitted within regulated markets, tax policy should support — not undermine — their integration into mainstream investment structures. Consistency between regulatory frameworks and tax treatment is critical if the UK wants to create a stable and competitive environment for digital asset innovation.” — Suzanne Morsfield, CFO at Lukka and Co-Lead of CryptoUK’s Tax Working Group
Addressing this disconnect would require a more coherent approach, built around three principles.
First, crypto ETNs that meet the FCA’s listing and regulatory requirements should remain eligible investments within Stocks and Shares ISAs.
Second, policymakers should adopt a technology-neutral principle when determining ISA eligibility. The key question should not be whether an asset references crypto, but whether the instrument itself meets the regulatory standards applied to other exchange-traded securities.
Third, the UK should reduce fragmentation between regulatory and tax policy when dealing with emerging financial technologies.
If one part of government opens the door to a new financial instrument while another quietly closes it through the tax system, the result is uncertainty for investors and firms alike.
The bigger picture
Digital asset investment products are no longer an experimental corner of finance. They are increasingly being embedded into regulated financial markets around the world.
Across Europe, some regulators are moving in the opposite direction. Luxembourg’s financial regulator has signalled that mainstream UCITS funds could be permitted to hold limited exposure to crypto exchange-traded products, opening the door for digital asset exposure within widely used investment funds.
Moves like this suggest that other financial centres are focusing on integration — adapting existing investment frameworks to accommodate digital assets rather than separating them.
The UK’s decision to reopen retail access to crypto ETNs was therefore an important step toward aligning the country with global market developments.
But by simultaneously limiting how those products can be held within ISAs, policymakers risk creating a disconnect between access and usability — allowing participation in theory, while constraining it in practice.
If the government wants the UK to remain competitive as a global financial centre in the digital asset era, the focus cannot be limited to permitting new financial products. It must also ensure that those products can integrate seamlessly into the investment structures that millions of people already use.
Opening the door to innovation is only the first step — ensuring it can be used in practice is what ultimately determines whether that innovation can scale.
