The London Stock Exchange (LSE) plans to accept applications for launching exchange-traded notes (ETNs) backed by Bitcoin and Ether, providing professional investors with another avenue to invest in the cryptocurrency asset class.
In a statement released on Monday, the LSE stated that it would begin accepting applications in the second quarter of 2024, with the exact launch date to be confirmed later. ETNs are debt securities that offer exposure to an underlying asset, and crypto ETNs enable investors to trade securities tracking cryptoassets on-exchange during London trading hours, with their own dedicated trading segments.
The conditions for admission to the LSE for Crypto ETNs include several key criteria outlined in a factsheet published by the exchange. Firstly, the proposed Crypto ETN must be physically backed and have a reliable and publicly available market price or value measure of the underlying Bitcoin or Ethereum assets.
“Exchanges will need to continue to ensure sufficient controls are in place, so trading is orderly and proper protection is afforded to professional investors. ETNs must meet all the requirements of the UK Listing Regime, for example on prospectuses and on-going disclosure,” the statement reads.
Additionally, the underlying cryptoassets must be held in ‘cold storage’ or equivalent arrangements and be held by a custodian subject to anti-money laundering (AML) regulation in specific jurisdictions, including the UK, EU (or EEA), Jersey, Switzerland, or the US.
Furthermore, the LSE specifies that crypto ETNs admitted to trading are only appropriate for professional investors and are available under trading segments designated as “Professional investors only.”
The Financial Conduct Authority (FCA) stated that it will not object to requests from Recognised Investment Exchanges (RIEs) to establish a UK-listed market segment for crypto asset-backed Exchange Traded Notes (cETNs). This move aligns with the LSE’s decision to accept applications for Crypto ETNs, indicating regulatory support for expanding the accessibility of cryptocurrency investment options.
