Adding crypto exchange-traded notes (ETNs) could add a significant layer of risk to your portfolio, after HMRC confirmed investors would only be allowed to hold the assets in a stocks and shares ISA for six months.
The Financial Conduct Authority (FCA) lifted the ban, which had been in place since January 2021, to sell crypto ETNs (cETNs) to retail investors last month. Crypto ETNs are an instrument that tracks the price of cryptocurrencies like Bitcoin or Ether without requiring direct ownership of these assets.
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What has HMRC said about holding cETNs in ISAs?
HMRC announced on 8 October that cETNs would be eligible to be held in a stocks and shares ISA between 8 October 2025, when the ban on sale of cETNs to retail investors was lifted, and 6 April 2026.
From April, cETNs will no longer be able to be bought in a stocks and shares ISA. Instead, they can then only be bought in an Innovative Finance ISA (IFISA). These are a much rarer product.
The latest data available shows that there are around 17,000 IFISAs in the UK, compared to over 3.8 million stocks and shares ISAs.
“In terms of amounts subscribed to ISAs, it’s mostly cash and stocks and shares,” said Viktor Nebehaj, CEO and co-founder of FreeTrade. “Innovative Finance ISAs are a rounding error.”
What wasn’t clear at the time was what would happen to cETNs bought into a stocks and shares ISA now, that were still there on 6 April. But HMRC has this week confirmed that any such holdings would have to be liquidated – in other words, sold off at whatever the market price happens to be at the time.
An HMRC newsletter published 4 November confirms:
From 6 April 2026, cryptoasset Exchange Traded Notes may only be held in an Innovative Finance ISA. Where the ISA manager is not approved to offer the Innovative Finance component they must either be:
- removed from stocks and shares ISA
- liquidated
Cryptocurrencies are volatile. Investors looking at the price increases they have notched up over the last decade could make a very strong case for holding them as a long-term investment, or especially as a potential hedge against inflation (particularly alongside gold).
But that is impossible to do if there is a set date in the future where investors will be forced to sell. If crypto markets happen to be enduring a downturn during April, any investors that have bought a cETN into their stocks and shares ISA following the lifting of the ban will be forced to sell their holdings and crystallise any losses they have incurred in the meantime.
“HMRC’s current guidance on crypto ETNs is not logical to me,” said Nebehaj. “As it stands, customers are able to buy these assets in their stocks and shares ISA, but after the tax year, they will be forced to sell or transfer their crypto ETNs into the obscure and little-used Innovative Finance ISA.”
“People can choose to invest in cryptoasset Exchange Traded Notes through their registered pensions or stocks and shares ISAs,” said an HMRC spokesperson. “Changing ISA rules takes time because it involves careful drafting, industry engagement, while following Parliamentary procedure. We’re working quickly to introduce these changes by April 2026.”
Will you be able to buy crypto ETNs in stocks and shares ISAs in future?
Anyone buying a crypto ETN at the moment has to consider the tax implications. Either they will have to hold the investment outside of a tax-efficient ISA, exposing the investment to CGT, or they will need to be ready to switch their holdings out of a stocks and shares ISA and into a IFISA in April – if, that is, they are among the handful of Brits who actually have an IFISA.
Of course this begs the question of why HMRC is making things so complicated for UK investors.
“The ISA framework is in need of simplification as is, but perpetuating Innovative Finance ISAs this way creates uncertainty for investors who have waited to get spot crypto exposure in their brokerage account,” said Nebehaj.
HMRC has confirmed that it is consulting with relevant industry figures on potentially restoring stocks and shares ISA eligibility in the future.
An HMRC spokesperson said that the government will keep the inclusion of cETNs 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 matures and as consumer understanding deepens.
Rather than tinkering with the rules, though, Nebehaj has called on HMRC to stick to a simple approach. “Luckily there’s a simple fix: just do nothing,” he said. “The stocks and shares ISA rules [currently] permit cETNs.”
What are crypto ETNs?
ETNs are similar to exchange-traded funds (ETFs), but they are debt-linked assets that track the price of a specific asset. In the case of cETNs, that asset is a cryptocurrency.
Brits are increasingly incorporating crypto into their financial planning and investing strategies. Charlie Morris, chief investment officer at ByteTree Asset Management, argues that it has become the reserve currency of the internet.
Research from broker Bitpanda shows that 6.5 million Brits now hold crypto investments. More than one in five (22%) of these hold crypto as a hedge against inflation and economic instability, and the same number view crypto as a legitimate long-term investment.
“Crypto is no longer just for early adopters,” said Pantelis Kotopoulos, UK country lead of Bitpanda. “People are exploring it alongside more traditional options, not to replace them, but to diversify their financial position and navigate an increasingly volatile economic environment.”
One of the main appeals of cETNs for exposure to crypto price movements is that they could, theoretically, be held in an ISA. That would make them exempt from capital gains tax (CGT).
But HMRC’s complex application of the ISA rules exposes any investors seeking to do so to the short-term volatility that typifies crypto markets.
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