The London Stock Exchange (LSE) has announced plans to commence accepting applications for Bitcoin and Ether crypto exchange-traded notes (ETNs) in the second quarter of 2024.
On March 11, the LSE confirmed its intention to accept applications, adhering to guidelines outlined in its Crypto ETN Admission Factsheet. However, an exact start date for accepting applications was not provided.
As detailed in the factsheet, crypto ETNs must be physically backed, non-leveraged, and backed by either Bitcoin or Ether. Additionally, the underlying crypto assets must be predominantly held in cold storage or an equivalent secure solution. Custodians holding these assets must comply with Anti-Money Laundering laws in specified jurisdictions.
LSE defines ETNs as debt securities providing exposure to an underlying asset. Crypto ETNs enable investors to trade securities reflecting the performance of crypto assets during the exchange’s trading hours. Unlike exchange-traded funds (ETFs), ETNs function as debt instruments backed by issuers rather than asset pools.
The U.K.’s Financial Conduct Authority (FCA) has stated its non-objection to Recognised Investment Exchanges (RIEs) establishing market segments for crypto-backed ETNs. However, these products are intended for professional investors, such as credit institutions and regulated investment firms.
The FCA emphasizes the high-risk nature of crypto assets and asserts that crypto-backed ETNs are unsuitable for retail investors due to their inherent risks. Consequently, selling crypto-backed ETNs to retail consumers remains prohibited. The FCA emphasizes the importance of investor awareness regarding potential losses associated with investing in crypto assets.
As the LSE prepares to accept applications for Bitcoin and Ether ETNs, regulatory oversight aims to protect investors while enabling access to crypto asset exposure for professional investors within established frameworks.
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