The London Stock Exchange (LSE) made a significant announcement on March 11, revealing its plan to accept applications for Bitcoin (BTC) and Ethereum (ETH) crypto exchange-traded notes (ETNs) starting in the second quarter of 2024.
This development comes in the wake of the UK’s Financial Conduct Authority (FCA) expressing support for proposals from Recognized Investment Exchanges (RIEs) to establish a designated market segment for crypto-backed ETNs.
In response to the FCA’s stance, the London Stock Exchange emphasized the importance of ensuring sufficient controls and investor protection measures for these products. They highlighted the necessity for adherence to ongoing disclosure requirements and prospectus regulations under the UK Listing Regime.
The LSE’s decision to accept applications is guided by a previously released factsheet, although the exact launch date remains undisclosed. However, the London Stock Exchange assured that it will be revealed “in due course.” Encouraging early engagement from prospective issuers, the exchange aims to mitigate any potential delays in the admission timetable.
The admission factsheet also touches upon the custody arrangements for underlying crypto assets, recommending primarily cold storage methods. Additionally, custodians must comply with anti-money laundering regulations in various jurisdictions, including the UK, EU, Jersey, Switzerland, or the US.
Describing ETNs as debt securities providing exposure to underlying assets, the document explains that crypto ETNs enable investors to trade securities representing crypto assets during London trading hours. This move by the London Stock Exchange represents a significant step forward in integrating cryptocurrencies into traditional financial markets.
As per the factsheet, crypto ETNs will be exclusively available for trading on the LSE’s designated trading segments, catering primarily to professional investors. Issuers have the flexibility to offer up to three different currency lines for each crypto ETN, providing further options for investors interested in this emerging asset class.
Exchanges will need to ensure that sufficient controls are in place to maintain orderly trading and provide proper protection to professional investors. Crypto exchange-traded notes (cETNs) must comply with all requirements of the UK Listing Regime, such as prospectuses and ongoing disclosure. This guidance is outlined in part of the FCA’s statement.
With an extended trading history providing more insight and data, the FCA stated that exchanges and professional investors should be better equipped to assess whether cETNs align with their risk appetite.
“The FCA maintains its belief that cETNs and crypto derivatives are not suitable for retail consumers due to the potential harm they present. Consequently, the ban on the sale of cETNs (and crypto derivatives) to retail consumers remains in effect,” stated the FCA.
Do you have any story or press releases you want to share? Send tips to editor@envestreetfinancial.com
Follow us on Twitter, Facebook, or LinkedIn to ensure you don’t miss out on any