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UK Retail Crypto ETPs

· 9 min read
Dora Noda
Dora Noda
Software Engineer

While the United States debates whether staking should be allowed in crypto ETFs, the UK just started offering yield-bearing Bitcoin and Ethereum products to ordinary retail investors through the London Stock Exchange.

On January 26, 2026, Valour began offering its yield-bearing Bitcoin and Ethereum ETPs to UK retail investors—the first staking-enabled crypto products available to non-professional investors on a major Western exchange. This development marks a sharp divergence in global crypto regulation: the UK is actively embracing yield-bearing digital asset products while the US SEC continues blocking staking in spot ETFs.

The Regulatory Shift: From Ban to Access​

Until October 2025, UK retail investors were completely locked out of crypto exchange-traded products. The FCA had maintained a blanket ban since 2021, arguing that cryptoassets were "unsuitable for most retail investors" due to volatility and market integrity concerns.

That changed on October 8, 2025, when the FCA lifted its four-year retail ban on crypto exchange-traded notes (ETNs). The policy shift wasn't impulsive—it followed a June 2025 consultation and reflected broader government priorities to position the UK as a competitive financial technology hub post-Brexit.

The new framework imposes strict requirements:

  • Products must be physically backed (collateralized by the underlying cryptoasset)
  • Assets must be held in institutional custody with cold storage protocols
  • Products must be admitted to trading on a UK recognised investment exchange like the London Stock Exchange

Critically, the FCA ban on crypto derivatives for retail investors remains in place. Only physically-backed products qualify for retail access.

Valour's Yield-Bearing Products​

Valour, a subsidiary of DeFi Technologies Inc. (Nasdaq: DEFT), received FCA and LSE approval to expand its professional-only ETPs to retail investors starting January 26, 2026.

The approved products:

1Valour Bitcoin Physical Staking (ISIN: GB00BRBV3124)

  • Provides regulated Bitcoin exposure
  • Includes a staking yield component reflected in the ETP's net asset value (NAV)

1Valour Ethereum Physical Staking (ISIN: GB00BRBMZ190)

  • Physically-backed Ethereum exposure
  • Staking reward participation through an exchange-listed instrument

For Bitcoin, the "staking yield" component is somewhat of a marketing misnomer—Bitcoin uses proof-of-work and doesn't technically stake. Valour's Bitcoin product likely generates yield through lending or similar mechanisms rather than on-chain staking.

For Ethereum, the staking component is straightforward: the underlying ETH is staked on the Ethereum network, and the approximately 3% annual staking rewards accrue to the product's NAV.

The Yield Advantage Over US ETFs​

The contrast with US crypto ETFs is stark.

In the United States, Grayscale recently made history by distributing staking rewards from its ETHE fund—but this was a first-of-its-kind exception, not the norm. BlackRock filed in late 2025 to introduce the iShares Ethereum Staking Trust, but SEC approval remains uncertain.

The SEC has systematically pushed back against staking in ETH ETF applications, citing concerns about:

  • Liquidity: Staked ETH has an unbonding period, complicating daily redemptions
  • Regulatory classification: Whether staking rewards constitute securities
  • Custody complexity: Managing staked vs. unstaked positions

Meanwhile, other jurisdictions have moved forward. Switzerland, Canada, and now the UK all permit staking in their crypto ETPs. The UK's approach is particularly notable because it extends this access to retail investors—not just professional or institutional buyers.

For a UK retail investor, this means potentially earning ~3% annual yield on Ethereum exposure that a US retail investor holding a spot ETH ETF cannot access. That's a meaningful competitive advantage in a product category where fees and returns matter significantly.

Market Context: Europe's Growing ETP Ecosystem​

The UK move fits into a broader European crypto ETP expansion.

European crypto ETP assets have more than doubled in two years:

  • 2023: €7.9 billion AUM
  • 2024: €16.7 billion AUM
  • Q3 2025: €19.3 billion AUM

Flows are on track for record highs. Through Q3 2025, European crypto ETPs attracted €1.7 billion in net inflows, with €972 million arriving in Q3 alone.

The market leaders—CoinShares, 21Shares, and WisdomTree—have all expanded their retail access following FCA approval.

CoinShares pioneered staking ETPs, launching the world's first products that pass staking rewards back to investors within the ETP's coin entitlement. Their Physical Staked Ethereum ETP charges a 0.00% management fee while delivering a ~1.25% staking reward (after a 10% service fee retained by the issuer).

WisdomTree maintains competitive fees: 0.15% annually for Bitcoin and 0.35% for Ethereum products. Their ETPs generate staking yield based on the portion of assets staked.

21Shares and Bitwise have similarly expanded retail access under the new FCA rules.

Tax Treatment: ISAs and SIPPs​

For UK investors, the tax treatment adds another layer of appeal.

From October 8, 2025, crypto ETPs became eligible for:

  • Self-Invested Personal Pensions (SIPPs): Tax-advantaged retirement accounts
  • Stocks & Shares ISAs (initially): Tax-free investment wrappers

Starting April 6, 2026, crypto ETPs will be reclassified as qualifying investments for Innovative Finance ISAs (IFISAs) instead of Stocks & Shares ISAs.

The ability to hold yield-bearing crypto exposure in tax-advantaged wrappers makes UK products significantly more attractive than their US counterparts, where crypto ETF holdings don't enjoy similar tax benefits.

Consumer Protection: What's Covered (and What Isn't)​

The FCA was clear about the limits of investor protection:

  • Crypto ETPs are not protected under the Financial Services Compensation Scheme (FSCS)
  • The Financial Ombudsman Service does not cover poor investment performance
  • Investors should understand they can lose all of their investment

The FCA's approach attempts to balance access with transparency: retail investors can participate, but they can't claim regulatory guarantees if things go wrong.

This stands in contrast to the EU's MiCA framework, which emphasizes harmonized rules across all member states with passporting rights for service providers. The UK is building a more flexible, product-specific regime rather than MiCA's comprehensive approach.

UK vs. US vs. EU: The Regulatory Divergence​

Three major jurisdictions are taking distinctly different approaches to crypto retail access.

United States:

  • Spot Bitcoin ETFs approved (January 2024)
  • Spot Ethereum ETFs approved (July 2024)
  • Staking in ETFs: Still blocked by SEC
  • Regulatory posture: Enforcement-driven, fragmented jurisdiction between SEC and CFTC

European Union (MiCA):

  • Comprehensive framework fully applicable since December 2024
  • Phase 2 rollout from January 2026 classifies stablecoins as e-money tokens
  • Harmonized rules across 27 member states with passporting rights
  • ESMA oversight with fines up to 12.5% of annual turnover for violations

United Kingdom:

  • Retail crypto ETP access: October 2025
  • Yield-bearing products: January 2026
  • Full cryptoasset framework: Expected October 2027
  • Regulatory posture: Product-specific, balancing growth with consumer protection

The UK's decision to permit yield-bearing products before the US reflects a calculated bet that supervised access is safer than pushing activity offshore or into unregulated channels.

Investor Appetite: 30% of UK Adults Consider Crypto ETPs​

Research from IG Group reveals substantial demand:

  • 30% of UK adults are considering crypto ETPs
  • Primary drivers: Regulatory oversight and perceived safety of exchange-traded products
  • Traditional investment platforms (Hargreaves Lansdown, AJ Bell, Interactive Investor) are expected to offer access

This represents a significant addressable market. The combination of yield-bearing features, tax-advantaged wrapper eligibility, and familiar ETF/ETP structures could accelerate mainstream adoption beyond what spot-only US products have achieved.

What Comes Next​

The FCA's 2026-2027 roadmap signals continued expansion:

September 2026: Cryptoasset "gateway" opens, enabling early applications for broader licensing

October 2027: Comprehensive cryptoasset regulations under the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025

Ongoing: Consultations covering stablecoins, trading platforms, lending, staking, and custody

The UK is building a layered regulatory framework: first allowing product-specific access (ETPs), then implementing comprehensive licensing requirements. This sequencing lets the market develop while the full regulatory apparatus is finalized.

The Competitive Implications​

For the global crypto industry, the UK's approach creates interesting dynamics:

For issuers: The UK becomes a premium market where yield-bearing products can reach retail investors—something not yet possible in the US.

For investors: UK residents gain access to products with potentially superior returns compared to US alternatives that can't stake.

For regulators: The UK serves as a live experiment in supervised retail crypto access. Success could influence US SEC thinking; problems could validate cautionary approaches.

The next 12-18 months will reveal whether yield-bearing retail crypto ETPs generate the investor interest the market expects—and whether the UK's balanced approach proves more sustainable than either the US's restrictions or the EU's comprehensive harmonization.

For now, UK retail investors have access to crypto products their American counterparts can only watch from the sidelines.

Sources​

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