The London Stock Exchange (LSE) is getting ready to offer something called cryptocurrency exchange-traded notes (ETNs).
These ETNs are like investments that track how well Bitcoin is doing. But the exchange staff say these investments are only for people who really know what they’re doing, like professionals. This new option is set to launch on May 28th.
New Crypto ETNs on the Horizon
Starting April 8th, investors keen on cryptocurrency exchange-traded notes (ETNs) can begin submitting their applications, as announced on March 25. If all goes well and their applications are successful, these funds will hit the market the following month, pending approval from the Financial Conduct Authority (FCA) of the U.K.
However, there’s a catch: these ETNs are strictly reserved for professional investors, aligning with the U.K. FCA’s regulations implemented in January 2021, which ban the sale of crypto derivatives and ETNs to retail investors. To meet the approval criteria, the crypto ETNs must adhere to certain guidelines. They must be physically backed, non-leveraged, and denominated only in Bitcoin or Ether, ensuring a reliable valuation of the underlying market price. Furthermore, the assets supporting these ETNs must be securely held in cold storage by a custodian licensed for Anti-Money Laundering (AML) practices, located in the U.K., EU, or the U.S.
Issuers interested in launching these ETNs must submit a draft prospectus and a detailed letter explaining their compliance with ETN requirements by April 15th.
LSE Welcomes Crypto ETNs with a Twist
The London Stock Exchange (LSE) is opening doors for Exchange-Traded Notes (ETNs) connected to cryptocurrencies, allowing issuers to propose up to three different currency lines. Unlike the usual process, LSE staff stress the importance of early engagement with the Exchange to discuss admission plans, recognizing the unique nature of these products.
This move reflects recent developments in the United States, where the Securities and Exchange Commission (SEC) approved spot Bitcoin exchange-traded funds in January. However, these funds don’t include retail investors, in line with regulations limiting retail access to crypto derivatives and ETNs.
Looking forward, the Financial Conduct Authority (FCA) aims to crack down on crypto market abuse over the next two years. The FCA plans to beef up monitoring and intervention systems to tackle market abuse and maintain market integrity. This push comes after the FCA implemented new rules for crypto-related marketing last October, promising strong action against any breaches.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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