London Stock Exchange to Accept Bitcoin, Ether-Backed ETN Applications in 2024
Summary:
The London Stock Exchange (LSE) plans to accept applications for Bitcoin and Ether Exchange-Traded Notes (ETNs) in the second quarter of 2024. The exchange issued guidelines stating that crypto ETNs must be physically backed, non-leveraged, and provide a public market measure for the underlying asset. Meanwhile, the UK Financial Conduct Authority announced no objections to the creation of a crypto-backed ETN market segment for professional investors, while still maintaining a ban on selling such investments to retail consumers due to associated risks.
The London Stock Exchange (LSE) has publicised its plans to begin receiving applications for Exchange-Traded Notes (ETNs) dealing in Bitcoin (BTC) and Ether (ETH) starting from the second quarter of 2024. On 11th March, without revealing a specific date, the exchange mentioned it will accept ETN offering proposals according to its defined crypto ETF rules. Through the rules, the exchange elaborates that the crypto ETNs should be backed by physical assets, non-leveraged and display the underlying asset's public market value. The crypto ETNs should primarily be based on BTC or ETH. Furthermore, all underlying crypto assets must be securely stored in a cold wallet, overseen by a custodian abiding by AML laws in the UK, EU, US or Switzerland. In the LSE's definition, ETNs are "debt instruments associated with a specific underlying asset". Crypto ETNs let investors transact in securities that monitor crypto assets' performance within the marketplace’s operational hours. An ETN is often seen as a milder option to Exchange-Traded Funds (ETFs). ETFs usually concentrate on complex debt strategies that don't smoothly adapt to funds. On another front, the UK's Financial Conduct Authority (FCA) mentioned that it doesn't object to Recognised Investment Exchanges (RIEs) forming a market segment for ETNs backed by crypto. The FCA suggests that these products can be rendered to "professional investors" such as regulated investment firms and credit institutions. It further advises marketplaces to implement robust controls and safeguard investors aptly. The FCA highlights that these ETNs need to fulfill standards like continuous disclosure and prospectuses under the UK Listing Regime. Nonetheless, FCA promptly expressed that these instruments are not suitable for retail investors due to their risky nature, thereby maintaining a ban on selling crypto-backed ETNs to retail consumers. In its statement, the FCA underscored the high-risk nature of crypto assets, advising investors to be ready for a total loss.
Published At
3/11/2024 1:07:25 PM
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