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The London Stock Exchange (LSE) plans to launch cryptocurrency Exchange-Traded Notes (ETNs) tracking Bitcoin and Ether on May 28.
Applications for these crypto ETNs can be submitted starting April 8, pending approval from the UK’s Financial Conduct Authority (FCA). Issuers must also provide a draft prospectus and a compliance letter by April 15 to meet ETN requirements.
These ETNs, although highly sought after by investors, will only be accessible to professional investors due to the UK FCA’s ban on retail sales of crypto derivatives and ETNs since January 2021. The FCA previously stated in March 2024 that it wouldn’t block Recognized Investment Exchanges (RIEs) from creating a market segment for crypto ETNs.
To meet FCA criteria, 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 can submit up to three different currency lines for the ETNs, with a need for discussions with the LSE early on due to unique admission timelines. This development follows the US Securities and Exchange Commission’s approval of spot Bitcoin exchange-traded funds in January, though lacking retail investor access.
The FCA’s plans for the next two years include tightening measures against crypto market abuse and enhancing monitoring systems for market integrity. This move aligns with their previous actions, such as implementing new rules for crypto-related marketing last October.
The London Stock Exchange’s launch of crypto ETNs for professional investors reflects regulatory caution amid growing interest in digital assets.
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