Home Editor's Pick UK’s Financial Conduct Authority Gives Green Light to Crypto ETNs on London Stock Exchange

UK’s Financial Conduct Authority Gives Green Light to Crypto ETNs on London Stock Exchange


The London Stock Exchange (LSE), one of the world’s established stock exchanges, is set to offer Bitcoin (BTC) and Ethereum (ETH) exchange traded notes (ETNs) on May 28, according to the firm’s announcement on Monday. The news came after the exchange announced earlier this month its plans to accept applications for listing Bitcoin and Ethereum Crypto ETNs in Q2 2024.

Following an announcement to accept applications for Bitcoin and Ethereum ETNs, the major stock exchange moves to the next step.

As noted, issuers can now submit applications to list their Crypto ETNs starting April 8. The LSE targets Tuesday, May 28 as the launch date of the crypto ETN market. The reason behind this planned time frame is to ensure issuers have enough time to meet listing requirements and prepare necessary documentation for their Crypto ETN programs, which require FCA approval.

To wit,

“We have decided to launch the market in Crypto ETNs on 28 May 2024 to enable the maximum number of issuers to be present in the market on the first day of trading,” wrote the LSE.

More People Want In To Cryptos

According to the LSE, issuers planning to list Crypto ETNs must submit certain documents to the LSE by April 15. These include a letter explaining how they meet the listing requirements outlined in the LSE’s Crypto ETN fact sheet and a draft of their base prospectus highlighting how it addresses the requirements mentioned in the letter.

The LSE also noted that issuers that fail to meet these requirements or deadlines will be disqualified from participating in the May launch.

Like ETFs, ETNs are a way to invest in the performance of an index without directly buying the underlying assets. The biggest difference is that ETNs are essentially loans an investor makes to the issuing financial institution. Plus, ETNs don’t typically pay out regular interest, but their value goes up or down based on the underlying asset or index (in this context, Bitcoin and Ethereum).

Access to ETNs is restricted due to regulations by the UK’s Financial Conduct Authority (FCA). In January 2021, the FCA banned the sale of crypto derivatives and ETNs to retail investors. In other words, only professional investors can buy these new crypto ETNs.

Following the announcement, Bitcoin has reclaimed the $70,000, up 5.5% in the last 24 hours, per CoinGecko’s data.

UK’s stance on crypto

Efforts to properly regulate the cryptocurrency market not only include stricter rules to protect investors but also relevant considerations to adapt to this new industry. The UK’s Financial Conduct Authority (FCA) has opened the door for crypto ETNs. Earlier in March, the FCA indicated it would be receptive to proposals from recognized investment exchanges to create a marketplace for ETNs based on cryptocurrencies.

While retail investors are still excluded, the latest move could indicate regulatory shift toward a more crypto-friendly environment. This is also considered one of the FCA’s ongoing efforts to turn the UK into a center for cryptocurrency innovation and adoption.

Despite the FCA’s openness to crypto ETNs, the UK remains cautious about crypto-related investments overall. In June last year, the FCA proposed a new policy targeting crypto advertising. Under this regulation, cryptocurrency will be considered a type of restricted public investment.

The policy, which took effect on October 8th, 2023, requires crypto-related advertisements to include a risk warning. Additionally, it prohibits incentive programs that offer referral commissions or benefits for attracting new participants.

The guidelines also require cryptocurrency companies to conduct due diligence and provide clear, transparent evidence of sufficient asset reserves.

Apart from that, entities promoting stablecoins must ensure their stability or link them to a reputable fiat currency. This ensures the stablecoin can be easily converted back to fiat currency. Violations of these guidelines can result in fines, imprisonment for up to two years, or both.

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