Key Insights
- The London Stock Exchange will start accepting applications for Bitcoin and Ether exchange-traded notes (ETNs) in Q2 2024
- The ETNs must be physically-backed, non-leveraged products tracking Bitcoin or Ether prices
- While allowed for institutional investors, crypto ETNs remain banned for retail investors in the UK
LONDON (MarketsXplora) – The London Stock Exchange said on Monday it will start accepting applications for Bitcoin and Ether exchange-traded notes (ETNs) in the second quarter of 2024, allowing institutional investors to gain exposure to cryptocurrencies through listed securities.
The exchange confirmed it would consider applications for physically-backed, non-leveraged crypto ETNs tracking the prices of bitcoin or ether, in line with guidelines outlined in its new Crypto ETN Admission Factsheet.
ETNs are debt securities providing exposure to an underlying asset. For crypto ETNs, the underlying bitcoin or ether must be held securely in cold crypto wallets by custodians subject to anti-money laundering rules in major jurisdictions.
Read also! London Stock Exchange Sets May 28 Launch for Crypto ETN Trading
While a firm date was not provided, the LSE’s move paves the way for listing investment products that can give institutional investors a way to trade cryptocurrencies during standard exchange hours.
“The exchange defines ETNs as debt securities which provide exposure to an underlying asset,” a LSE spokesperson said. “Crypto ETNs allow investors to trade securities that track the performance of crypto assets during the exchange’s trading hours.”
The British exchange is following other major bourses around the world in laying the groundwork for crypto-backed securities aimed at institutional investors.
Unlike exchange-traded funds (ETFs) which hold a basket of assets, ETNs are debt instruments issued and backed by their providers, making them similar to an unsecured bond tracking whatever they reference.
The UK’s Financial Conduct Authority said it would not object to requests from exchanges wanting to create market segments for crypto ETN trading by “professional investors” such as banks and authorized financial firms.
However, the regulator maintained its ban on offering crypto ETNs to retail consumers due to the investment’s complexity and risks.
“The FCA continues to remind people that cryptoassets are high risk and largely unregulated. Those who invest should be prepared to lose all their money,” the watchdog said.
While allowing institutional crypto investment, the LSE’s guidelines still impose restrictions like requiring the underlying bitcoin or ether to be held by regulated custodians meeting anti-money laundering standards.
The exchange said applications will formally open in Q2 2024 after finalizing the exact launch timeline.
After a multi-year bitcoin bear market depressed prices, renewed institutional interest in crypto from players like BlackRock has reignited demand for investment vehicles tracking digital assets.