London Stock Exchange Set to Unveil Cryptocurrency Exchange-Traded Notes

The London Stock Exchange (LSE) is set to introduce crypto Exchange-Traded Notes (ETNs) for Bitcoin and Ether on May 28th, pending approval from the UK's Financial Conduct Authority (FCA). These ETNs will be physically backed, non-leveraged, and only accessible to professional investors due to current FCA regulations that prohibit retail sales of crypto derivatives and ETNs.

London Stock Exchange to Launch Cryptocurrency Exchange-Traded Notes

The London Stock Exchange (LSE) has announced its intention to introduce cryptocurrency Exchange-Traded Notes (ETNs) that track Bitcoin and Ether on May 28.

Investment firms seeking to issue these crypto ETNs must submit applications by April 8, subject to approval by the UK's Financial Conduct Authority (FCA). Additionally, issuers are required to provide a draft prospectus and a compliance letter by April 15 to comply with ETN regulations.

While there is significant interest from investors, these crypto ETNs will initially be available only to professional investors. This is due to the FCA's ban on the retail sale of crypto derivatives and ETNs, which has been in effect since January 2021.

To meet FCA requirements, crypto ETNs must be physically backed, non-leveraged, and denominated in Bitcoin or Ether. They must also have a reliable value based on market prices and be held in cold storage by licensed custodians in the UK, EU, or US.

Issuers may submit up to three different currency lines for their ETNs, and early discussions with the LSE are recommended due to specific admission timelines. This development parallels the recent approval of spot Bitcoin exchange-traded funds by the US Securities and Exchange Commission in January, although those funds are also not accessible to retail investors.

The FCA's plans for the coming years include intensifying efforts to combat crypto market abuse and enhancing monitoring systems for market integrity. These measures align with previous actions, such as the implementation of new regulations for crypto-related marketing in October 2022.

The LSE's launch of crypto ETNs for professional investors signifies a cautious approach to regulation amidst growing interest in digital assets. While retail investors may not have direct access to these products initially, the regulatory landscape is evolving, and further developments in the cryptocurrency market are expected.