The London Stock Exchange (LSE) has made an announcement that it will begin accepting applications for Bitcoin and Ether crypto exchange-traded notes (ETNs) in the second quarter of 2024.
On March 11th, the exchange confirmed that it would accept applications in accordance with the guidelines outlined in its Crypto ETN Admission Factsheet. However, the exact date for accepting applications was not provided.
According to the factsheet, the exchange specifies that crypto ETNs should be physically backed and not leveraged. They should have a publicly available market price or value measure of the underlying asset and must be backed by Bitcoin (BTC) or Ether (ETH).
The exchange also emphasizes that the underlying crypto assets should be primarily held in a cold wallet or a similar secure storage system. Additionally, the assets must be held by a custodian who is subject to Anti-Money Laundering laws in the United Kingdom, the European Union, Switzerland, or the United States.
ETNs are defined by the exchange as “debt securities that provide exposure to an underlying asset.” Crypto ETNs enable investors to trade securities that track the performance of crypto assets during the exchange’s trading hours.
ETNs are widely regarded as a more flexible alternative to exchange-traded funds (ETFs). Unlike ETFs, which pool assets, an ETN is a debt instrument backed by its issuers. ETFs often focus on complex debt strategies that are not easily accommodated within funds.
In the meantime, the Financial Conduct Authority (FCA) of the United Kingdom has also announced that it will not object to requests from Recognised Investment Exchanges (RIEs) to establish a market segment for crypto-backed ETNs. The FCA states that exchanges can offer these products to “professional investors,” including credit institutions and investment firms that are authorized or regulated to operate in financial markets.
The financial watchdog also urges exchanges to implement sufficient controls to adequately protect investors. The FCA further stipulates that crypto-backed ETNs must meet requirements such as ongoing disclosure and prospectuses, which are part of the U.K. listing regime.
While ETNs can be offered to institutions, the FCA deems them unsuitable for retail investors due to their risks. The regulator maintains the ban on selling crypto-backed ETNs to retail consumers. “The FCA continues to remind individuals that cryptoassets are high risk and largely unregulated. Those who invest should be prepared to lose all of their money,” the regulator stated.
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Bitcoin and Ethereum ETNs to be accepted by London Stock Exchange