London Stock Exchange Embraces Crypto Future With Bitcoin & Ethereum ETNs

In a groundbreaking move on Mar 11, 2024, the London Stock Exchange (LSE) has opened its doors to the future of finance by announcing the acceptance of Bitcoin and Ethereum Exchange Traded Notes (ETNs) applications, starting from the second quarter of this year. This pivotal decision comes on the heels of the UK Financial Conduct Authority’s (FCA) green light for crypto asset-backed exchange-traded notes, signaling a new era of cryptocurrency integration into the mainstream financial market.

The LSE’s announcement heralds a new opportunity for investors to engage with the digital currency market during London trading hours through a regulated medium. The Exchange has set rigorous criteria for these crypto ETNs, akin to the US spot ETFs, mandating physical backing and non-leveraged structures.

In addition, the LSE maintains that the market price for the underlying crypto assets must be reliable and publicly available for proposed Crypto ETNs. Also, they require these ETNs to be physically backed, meaning non-leveraged, with a market price or another value measure of the underlying asset that meets these criteria.

Furthermore, the LSE highlights the importance of security by mandating that crypto assets primarily reside in ‘cold storage’ or that equivalent security measures shield them. Custodians must adhere to Anti-Money Laundering (AML) regulations within approved jurisdictions. Also, the LSE designs stringent security measures to safeguard the market’s integrity and investors’ interests.

While the LSE encourages submitting applications, it retains the discretion to reject any that do not align with its standards, emphasizing its commitment to market integrity. These ETNs, tailored for professional investors, mark a controlled foray into the Bitcoin and crypto sector, framed within a strict regulatory environment to address the volatility and security concerns associated with crypto assets.

Bitcoin Value Surges After LSE Approval

The LSE’s cautious yet forward-looking approach mirrors the FCA’s prohibition on selling crypto derivatives and ETNs to retail consumers. This strategy reflects a balanced progression toward incorporating cryptocurrencies into conventional financial systems.

However, prospective issuers should initiate discussions with the LSE early to avoid potential delays, aiming to streamline the admission process for these novel financial instruments through proactive engagement.

The LSE’s initiative to welcome Bitcoin and Ethereum ETNs is a significant stride in the crypto domain, providing European professional investors with regulated channels to invest in digital assets. In the wake of this announcement, Bitcoin’s value surged past $71,000, underscoring the positive market response to this development. The LSE’s embrace of cryptocurrency ETNs is a testament to the evolving landscape of investment opportunities in the digital age.

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Furthermore, the author’s views are for reference only and shall not constitute investment advice. Before purchasing, please ensure you fully understand and assess the products and associated risks.

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