Starting on May 28th, professional investors in the United Kingdom wanting to step into crypto-assets, without all the tribulations of direct investment, can now buy Bitcoin and Ethereum Exchange Trade Notes on the London Stock Exchange, the financial institution announced yesterday.
Much like exchange-traded funds, ETNs are open-ended securities that mirror the behavior of assets on an index or benchmark, with liquidity guaranteed by market makers.
The move is in step with the British government’s desire to be an international crypto hub and the alignment of public policy with those ambitions.
Trading financial products relating to crypto assets in the country’s exchanges has been banned by the Financial Conduct Authority since 2020. Early this month, however, the market regulator updated its position, announcing it would “no longer object to requests from Recognised Investment Exchanges (RIEs) to create a U.K. listed market segment for crypto asset-backed Exchange Traded Notes (cETNs).”
The shift in the FCA’s risk perception of crypto-related products is only partial as it “continues to believe cETNs and crypto derivatives are ill-suited for retail consumers due to the harm they pose.” As such, only accredited investors will have the chance to trade the Bitcoin and Ethereum ETNs.
In the U.S., the approval of Bitcoin ETFs by the Securities and Exchange Commission at the start of the year was a significant step forward for the crypto industry as it opened its doors to institutional and risk-averse investors.
The BTC funds are proving to be highly successful, and they represent a driving force in the recent surge in crypto prices. Bitcoin is currently trading at $70 million, 4.4% lower than the all-time high its price reached two weeks ago.
However, the U.S. regulatory agency seems reluctant to let more crypto-related products into the country’s financial markets. In the past couple of weeks, BlackRock, Fidelity, and Grayscale have all seen the SEC postpone its decision on whether to accept their Ethereum-based Exchanged Traded Funds application.
The regulator’s recent opening of an investigation on the Ethereum Foundation and the financial nature of ETH (if it is, or is not a security) is likely to delay even more the approval of these financial products in the U.S., as such probes tend to take several months.
In the U.K., Ether doesn’t raise the same issues with regulators who see cryptocurrency as an asset reliable and consistent enough to be the base of exchange products in traditional financial institutions.
To guarantee consumer safety, the LSE is asking that companies wanting to offer cETNs to their clients should not have leverage on the notes, and should keep at least 90% of the underlying decentralized assets in cold storage or trust it with a custodian subject to anti-money laundering laws in the U.K., EU, Jersey, Switzerland or U.S.
The London Stock Exchange will accept financial firms to submit the notes issuing application from April 8th to April 15th.
