The London Stock Exchange (LSE) will launch cryptocurrency exchange-traded notes (ETNs) tracking the performance of Bitcoin (BTC) and Ether (ETH) on May 28.
According to the March 25 announcement, applications for the crypto ETNs can be submitted as soon as April 8, and successful funds will be listed the following month contingent on the approval by the country’s Financial Conduct Authority (FCA). Additionally, issuers must submit a draft prospectus and a letter explaining why they meet ETN requirements by April 15.
Despite substantial investor interest, the ETNs will only be available to professional investors as per the U.K. FCA’s ban on the sale of crypto derivatives and ETNs enacted in January 2021. To be approved, crypto ETNs must be physically backed, non-leveraged, have a reliable value of the underlying market price, and can only be denominated in Bitcoin or Ether. The underlying assets must be held in cold storage by an Anti-Money Laundering licensed custodian in the U.K., EU, or the U.S.
Issuers can submit up to three different currency lines for the ETNs. "Given the nature of the product, and the admission guidance set out in this Factsheet, standard admission timelines do not apply to Crypto ETNs," LSE staff wrote. "Issuers and their advisers should therefore liaise with the Exchange at the earliest opportunity to discuss their proposed admission.”
The move follows the footsteps of the U.S. Securities and Exchange Commission’s approval of spot Bitcoin exchange-traded funds in January, albeit lacking a retail investor component. In its two-year plan, the FCA listed tightening its measures against crypto market abuse as one of its goals. The regulator will improve monitoring and intervention systems to cover market abuse and integrity. Last October, the FCA implemented new rules for crypto-related marketing, promising "robust action" against potential breaches.
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