Bitcoin and Ethereum ETNs to be accepted by the London Stock Exchange

March 15, 2024

By Anjali Kochhar

In the second quarter of 2024, the London Stock Exchange (LSE) will begin to accept applications for exchange-traded notes (ETNs) backed by cryptocurrencies such as Bitcoin and Ether.

According to an announcement, the exchange stated that it would entertain applications as long as they complied with the regulations outlined in its Crypto ETN Admission Factsheet. However, the exchange did not specify the exact date when it would commence accepting applications.

In its factsheet, the exchange specified that crypto ETNs must be physically backed and non-leveraged, with a publicly available market price or value measure of the underlying asset. These ETNs should be supported by either Bitcoin (BTC) valued at $72,198 or Ether (ETH) valued at $4,032.

Furthermore, the exchange emphasized that the underlying crypto assets must be predominantly held in cold wallets or similar secure storage solutions. Additionally, these assets should be entrusted to a custodian who operates in compliance with Anti-Money Laundering regulations in the United Kingdom, the European Union, Switzerland, or the United States.

ETNs are described as “debt securities which provide exposure to an underlying asset” by the exchange. Investors can trade securities that track the performance of cryptocurrency assets during trading hours on the exchange by using crypto ETNs.

Exchange-traded notes (ETNs) are commonly regarded as a softer substitute for ETFs. An ETN is not a pool of assets like ETFs; rather, it is a debt instrument backed by its issuers. ETFs often concentrate on exotic debt strategies that are difficult to incorporate into funds.

The Financial Conduct Authority (FCA) of the United Kingdom also declared that it would not oppose requests from Recognized Investment Exchanges (RIEs) to establish a market segment for ETNs backed by cryptocurrency. The FCA states that exchanges are permitted to sell the products to “professional investors,” which includes financial institutions and investment firms that are registered or permitted to do business in the financial markets.

The exchanges were also urged by the financial watchdog to make sure that enough safeguards are in place to effectively protect investors. The FCA further stated that in order to comply with the U.K. listing requirements, crypto-backed ETNs must provide prospectuses and continuous disclosure.

Exchanges provide ETNs to institutions, but the FCA stated that due to their risks, they are not appropriate for retail investors. Retail consumers will not be allowed to purchase ETNs backed by cryptocurrencies, according to the regulator. “People are still being reminded by the FCA that crypto assets are extremely risky and mostly unregulated. The regulator stated, “Those who invest should be ready to lose all of their money.”

About the author

Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.

Translate Now