March 27, 2024
Bitcoin News

London Stock Exchange Embraces Bitcoin and Ether ETNs in Q2 2024

The London Stock Exchange (LSE) has officially declared that it will open its doors to Bitcoin (BTC) and Ether (ETH) Exchange-Traded Notes (ETNs) applications in the second quarter of 2024. The exchange confirmed this development in a statement, indicating that applications will be processed in accordance with guidelines outlined in its Crypto ETN Admission Factsheet.

The Factsheet stipulates that eligible crypto ETNs must be physically backed, non-leveraged, and have a publicly available market price or value measure for the underlying assets, which must be exclusively supported by Bitcoin or Ether. Additionally, the crypto assets must be “wholly or principally” held in cold wallets or equivalent secure storage solutions. Custodians responsible for holding these assets must comply with Anti-Money Laundering laws in the United Kingdom, the European Union, Switzerland, or the United States.

LSE defines ETNs as debt securities that provide exposure to an underlying asset. Unlike traditional Exchange-Traded Funds (ETFs), ETNs operate as debt instruments backed by their issuers rather than a pool of assets. This move allows investors to trade securities tracking crypto asset performance during standard trading hours.

Simultaneously, the UK’s Financial Conduct Authority (FCA) has expressed its non-objection to Recognised Investment Exchanges (RIEs) creating a market segment for crypto-backed ETNs. The FCA has limited this opportunity to “professional investors,” such as credit institutions and authorized investment firms operating within regulated financial markets.

The FCA emphasizes the need for exchanges to implement robust controls to safeguard investors’ interests and insists that crypto-backed ETNs adhere to requirements like ongoing disclosure and prospectuses, integral components of the UK listing regime.

However, the FCA maintains a cautious stance regarding retail investors, deeming crypto-backed ETNs unsuitable for this category due to their inherent risks. The regulator continues to stress the speculative nature of crypto assets and their largely unregulated status, warning investors to be prepared for the possibility of losing all invested funds.

Image from Flickr

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