thecryptobasic.com
The cryptocurrency market has received yet another boost after the UK’s financial markets regulators signaled approval for crypto-based ETNs.
The ongoing institutional adoption of cryptocurrencies has received a new boost, this time in the United Kingdom. On Monday, the Financial Conduct Authority (FCA) revealed in a notice that it has updated its position on crypto exchange-traded notes (ETNs).
The updated guidance reveals that the FCA will not object to applications by recognized stocks and securities exchanges to offer these crypto-based trading products to institutional investors.
However, these exchanges must ensure that they comply with all registration requirements under the U.K. laws and also never sell the products to retail consumers.
The fencing of retail investors is noteworthy as the UK has, since January 2021, banned crypto exchanges offering crypto-based derivatives to everyday users.
The regulator reiterated that its ban on retail exposure remains intact despite the latest adjustment to allow so-called cETNs for sophisticated investors.
London Stock Exchange To Welcome Crypto ETN Issuers
Following the FCA’s announcement, the London Stock Exchange (LSE) has quickly signaled its intent to onboard crypto-base ETNs.
Per its announcement, the LSE will begin accepting such applications in Q2 2024, with the exchange also providing a factsheet for potential issuers and traders.
Although the exchange fell short of providing a specific launch date for the crypto ETNs, it did mention that the offerings will initially support Bitcoin and Ethereum. It will also function like mainstream ETNs, which provide investors with exposure to the price of the underlying asset.
Notably, unlike Bitcoin ETFs, which hold the BTC it tracks, ETNs function as a debt note issued by the fund manager that offers it. Investors can trade the shares on exchanges and redeem them for the market value of the asset.
UK Joins the Institutional Crypto Party
The U.K.’s move to support crypto ETNs follows the approval of spot Bitcoin ETFs in the U.S. back in January. Evidently, the spot Bitcoin ETF in the U.S. has improved public perception of cryptocurrencies and boosted institutional demand for these assets.
At the time of writing, the global market cap for all cryptocurrencies has surpassed $2.7 trillion, edging closer to its previous all-time high of $2.9 trillion set in 2021.
With institutions undeniably having access to greater capital, many speculate that the crypto market could surge much higher, reaching the $10 trillion mark by the end of the current market cycle.