The London Stock Exchange (LSE) has announced that it will introduce exchange-traded notes (ETNs) for Bitcoin (BTC) and Ether (ETH) on May 28. According to the announcement made on March 25, applications for the crypto ETNs can be submitted starting from April 8. The funds will be listed the following month if they receive approval from the Financial Conduct Authority (FCA). By April 15, issuers must submit a draft prospectus and a letter explaining how they meet the requirements for ETNs.
Despite high investor interest, the ETNs will only be accessible to professional investors due to the U.K. FCA’s ban on the sale of crypto derivatives and ETNs, which was implemented in January 2021. To gain approval, crypto ETNs must be physically backed, non-leveraged, have a reliable value based on the underlying market price, and can only be denominated in Bitcoin or Ether. The underlying assets must be held in cold storage by an Anti-Money Laundering licensed custodian in the U.K., EU, or the U.S.
Issuers can submit up to three different currency lines for the ETNs. LSE staff stated, “Considering the nature of the product and the admission guidance outlined in this Factsheet, the standard admission timelines do not apply to Crypto ETNs. Therefore, issuers and their advisers should contact the Exchange at the earliest opportunity to discuss their proposed admission.”
This move follows the U.S. Securities and Exchange Commission’s approval of spot Bitcoin exchange-traded funds in January, although without a retail investor component. The FCA included strengthening measures against crypto market abuse as one of its goals in its two-year plan. The regulator plans to enhance monitoring and intervention systems to address market abuse and integrity. In October of last year, the FCA implemented new regulations for crypto-related marketing, promising to take “robust action” against potential breaches.
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