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The London Stock Exchange (LSE) announced its plan to accept applications for Bitcoin and Ethereum exchange-traded notes (ETNs). This move will commence in the second quarter of this year.
It marks a step towards integrating cryptocurrency into the mainstream financial market. The focus will be on professional investors, showcasing a cautious yet progressive approach towards crypto investment.
LSE Opens Doors For ETNs: How Are They Different From ETF?
Exchange-traded notes (ETNs), akin to exchange-traded funds (ETFs), are issued by banks or investment managers. These instruments are crucial for tracking underlying assets or indexes. ETNs offer a bond-like investment avenue.
In contrast, ETFs involve investing in a fund that holds the assets it tracks. This difference underscores the diverse ways investors can engage with the cryptocurrency market.
Following the Financial Conduct Authority’s (FCA) guidelines, the LSE’s move aligns with the regulatory framework. The FCA has approved Recognized Investment Exchanges (RIEs) to propose a listed market segment for cryptocurrency-backed ETNs.
Moreover, it emphasizes the importance of robust controls. These measures ensure orderly trading and protect professional investors, thereby maintaining market integrity.
“The Financial Conduct Authority (FCA) will not object to requests from Recognised Investment Exchanges (RIEs) to create a UK listed market segment for crypto asset-backed Exchange Traded Notes (cETNs),” the FCA stated.
Under the UK Listing Regime, crypto ETNs must meet stringent requirements, including those for prospectuses and ongoing disclosures. Such crypto regulations are designed to equip professional investors with the necessary tools to assess crypto investments’ risks. This is particularly important given the volatile nature of digital currencies.
The FCA remains cautious, especially regarding retail consumers. It continues to enforce a ban on selling crypto ETNs and derivatives to this group, highlighting the potential risks.
Read more: Crypto Tax 2024: A Complete UK Guide
The LSE’s initiative to incorporate crypto ETNs represents a significant shift in the investment arena. It opens new avenues for professional investors to explore the crypto sector. This move comes as Bitcoin and Ethereum see remarkable price surges. The flagship crypto, Bitcoin, has surpassed the $71,000 milestone, while Ethereum trades around $4,000.
Moreover, the FCA’s regulatory oversight ensures that the market remains stable and secure for professional investors.