London - The UK will lift bans on key types of crypto debt security types in a bid to catch up with the U.S. and other financial hubs as it appears to be a global hub for digital assets.

On Friday, the Financial Conduct Authority, the UK's leading regulator of financial services, announced a proposal to revoke its ban on providing crypto exchange-traded notes to retail investors.

An exchange-traded note is a debt instrument that is associated with one or more designated assets (in this case). Essentially, they allow investors the risk of obtaining digital tokens by using regulated exchanges.

Since the FCA banned the ban in 2019, sales of cryptocurrency investors have been banned in the UK due to concerns about the potential harm they have caused to consumers.

However, on Friday, the FCA said it proposed lifting the ban on encrypted ETNs “supports UK growth and competitiveness.” Watchdog added that restrictions on crypto derivatives will remain in place.

David Geale, executive director of FCA Payments and Digital Assets, said in a statement: “This consultation demonstrates our commitment to supporting the growth and competitiveness of the UK crypto industry.”

“We hope that rebalancing our risk approach and lifting the ban will allow people to choose whether this high-risk investment is right for them because they may lose all their money.”

Cryptocurrency companies quickly praised the development as a major moment for the UK industry, often seen as lagging behind the U.S., the EU and other global players in digital assets.

Since the SEC approved rule changes, funds traded on spot crypto exchanges have been provided in the U.S. to allow the creation of the first bitcoin-connected ETFs early last year.

In April, the British government released a draft legislation for the cryptocurrency sector with the aim of making the country a “world leader in digital assets”. The FCA is conducting a detailed roadmap through detailed consultation and discussion papers, with the aim of implementing a regulatory regime for cryptocurrencies by 2026.

"The UK has been an outlier for ETN so far. We hope this move will improve consumer protection and we will continue to have access to regulated highly regulated derivatives to lift the ban on retail investors," said Ian Taylor, board consultant at Crypto Trade Body Cryptouk.

Bivu Das, UK general manager of Kraken, said the proposal to approve the sale of crypto ETNs to consumers marks a "main milestone in the UK's crypto ecosystem."

The DAS added that the FCA “recognizes that the market has been greatly mature and that outdated restrictions no longer achieve its intended purpose.” “If the UK is to remain competitive in leading digital assets in the competition, such regulatory moves are crucial.”