UK investors will be allowed to hold cryptocurrency exchange traded products within tax-incentivised individual savings accounts (Isas) and pension schemes, the government ruled on Wednesday.
The Isa announcement came on the day that the Financial Conduct Authority lifted its ban on retail investors buying crypto exchange traded products, although due to regulatory hold-ups retail access is unlikely to be available until next week.
However, investors wanting to hold any of the permitted London-listed crypto exchange traded notes (ETNs) in a stocks-and-shares Isa will have to buy during the current tax year, frustrating those who have already used their £20,000 annual allowance.
From April 6 2026, crypto ETNs will instead be reclassified as qualifying investments for the Innovative Finance Isa, HMRC said. This type of Isa — little used by consumers — is not covered by the UK’s Financial Services Compensation Scheme.
“Making crypto ETNs eligible for Isas and registered pension schemes is a significant step towards mainstream adoption,” said Dovile Silenskyte, director of digital assets research at WisdomTree, an issuer of crypto ETNs.
“Investors can gain exposure to digital assets through the same trusted and tax-efficient frameworks that support traditional investments.”
Russell Barlow, chief executive of 21Shares, Europe’s largest issuer of crypto exchange traded products, said that “huge demand” had built up among retail investors for exposure to cryptoassets.
However, Barlow added that consigning digital asset ETPs to the obscure Innovative Finance Isa, hitherto issued largely by peer-to-peer lending platforms, was not “fair”, since it was “sending a clear signal from the regulator’s perspective that they view them as having a very different risk to traditional assets”.
Jason Hollands, managing director of wealth manager Evelyn Partners, said HMRC’s decision to allow investors to hold crypto ETNs in stocks-and-shares Isas this financial year, but not next, did not make sense.
In theory, he said, someone with a stocks-and-shares Isa worth, say, £500,000, could convert it into crypto ETNs this year, but future conversions would be available only to the handful of people who already held Innovative Finance Isas. “It’s bizarre,” he said.
Just 10,000 people subscribed to these Isas in the 2023-24 tax year, a 23.5 per cent fall from 2022-23, according to government data. This was a tiny fraction of the 15mn Isas subscribed to in that year.
HMRC said the government would keep the inclusion of crypto ETNs in tax-advantaged accounts under review with a view to including them in the stocks-and-shares Isa at a later date as the market matured and as consumer understanding deepened.
Investors will also be able to include crypto ETNs in their self-invested pension plans (Sipps), benefiting from tax relief on contributions at their marginal rate and investment growth within the plan.
ETNs track an underlying index and are listed and traded on an exchange. In most respects they function in the same way as the better-known exchange traded funds (ETFs).
There are 17 crypto ETNs listed on the London Stock Exchange from asset managers such as Fidelity, Invesco, WisdomTree and 21Shares, offering access to the returns of cryptocurrencies without obliging customers to use little-regulated exchanges and wallets.
However, investors may struggle to buy them for several months, despite the FCA lifting its retail ban.
Hargreaves Lansdown, the UK’s largest retail investment platform, said in a statement that crypto ETNs would not be available until “early next year following careful development of the client journey and appropriateness assessment”, which must be conducted for all retail investors wishing to buy the products.
Hargreaves added its view was that “bitcoin is not an asset class . . . shouldn’t be relied upon to help clients meet their financial goals . . . and unlike other alternative asset classes has no intrinsic value”.
A spokesman for AJ Bell, the second-largest platform, said: “It is still our expectation that we will offer [crypto ETNs] but it won’t be immediate upon the ban lifting.”
