On May 28, the London Stock Exchange (LSE) will introduce cryptocurrency exchange-traded notes (ETNs) that will track the performance of Bitcoin (BTC) and Ether (ETH), as reported in the announcement made on March 25. Starting from April 8, interested parties can submit applications for the crypto ETNs, and upon approval from the Financial Conduct Authority (FCA), the successful funds will be listed the following month. By April 15, issuers must submit a draft prospectus and a letter explaining their compliance with ETN requirements.
However, it is important to note that despite the significant investor interest, the ETNs will only be accessible to professional investors due to the U.K. FCA’s ban on the sale of crypto derivatives and ETNs that came into effect in January 2021. For a crypto ETN to be approved, it must be physically backed, non-leveraged, have a reliable value based on the underlying market price, and be denominated solely in Bitcoin or Ether. Furthermore, the underlying assets must be securely held in cold storage by an Anti-Money Laundering licensed custodian in the U.K., EU, or the U.S.
Issuers are permitted to submit up to three different currency lines for the ETNs. LSE staff stated, “Given the nature of the product, and the admission guidance set out in this Factsheet, standard admission timelines do not apply to Crypto ETNs. Issuers and their advisers should therefore liaise with the Exchange at the earliest opportunity to discuss their proposed admission.”
This move by the London Stock Exchange follows in the footsteps of the U.S. Securities and Exchange Commission’s approval of spot Bitcoin exchange-traded funds in January, although it lacks a retail investor component. In its two-year plan, the FCA has highlighted the tightening of measures against crypto market abuse as one of its goals. The regulator aims to enhance monitoring and intervention systems to address market abuse and maintain integrity. In October of last year, the FCA implemented new rules for crypto-related marketing and promised to take “robust action” against any potential breaches.
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