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The United Kingdom’s Financial Conduct Authority has said it will not object to requests by recognised investment exchanges to launch crypto-backed exchange-traded notes. The exchange-traded notes will only be made available to professional investors such as regulated investment firms.
ETNs Must Adhere to UK Listing Requirements
The Financial Conduct Authority (FCA), the watchdog for the financial services industry in the United Kingdom (UK), announced on March 11 that it would not object to requests by exchanges to create a listed market segment for crypto asset-backed exchange-traded notes (ETNs).
The watchdog, however, said these ETNs will only be available to professional investors or institutions authorized to operate in financial markets. Described as a type of unsecured debt security, an ETN tracks an underlying security and does not pay regular interest. Upon maturity, the ETN pays out cash based on the performance of the underlying security.
In its March 11 statement, the FCA also warned Recognised Investment Exchanges (RIEs) aspiring to launch ETNs that they would need to have sufficient controls in place. Such controls ensure orderly trading and the protection of investors. In addition, the crypto ETNs will have to meet all of the country’s listing requirements, the FCA said.
Regarding its decision to exclude retail investors from accessing the ETNs, the watchdog stated:
The FCA continues to believe cETNs and crypto derivatives are ill-suited for retail consumers due to the harm they pose. As a result, the ban on the sale of cETNs (and crypto derivatives) to retail consumers remains in place.
FCA Reiterates Position on Crypto Assets
According to the statement, the FCA initially issued an order in January 2020. This order barred the offer or sale of crypto derivatives and ETNs that reference certain types of crypto assets.
In the same statement, the FCA also reiterated its position on crypto investing and warned of the associated risks. The watchdog concluded the statement by explaining how it has applied existing laws to exclude firms that do not meet its minimum standards for preventing financial crime.
Specifically, these laws have been employed to protect U.K.-based users from unfair or misleading crypto marketing and to alert people to crypto scams, the FCA said.
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