The London Stock Exchange (LSE) has revealed plans to introduce exchange-traded notes (ETNs) for Ethereum (ETH) and Bitcoin (BTC) in the second quarter, marking a significant step in the integration of cryptocurrencies into traditional financial markets.
While the exact launch date of these ETNs is yet to be finalized, the LSE stated in a statement on March 11 that further details will be provided in due course.
Prospective applicants seeking to engage in ETN trading must adhere to a recently released factsheet by the LSE. According to the factsheet, ETNs are characterized as “debt securities which provide exposure to an underlying asset.” This structured approach aims to ensure transparency and clarity in the trading process.
The LSE’s decision follows an announcement by the UK’s Financial Conduct Authority (FCA), expressing openness to proposals for a listed market segment dedicated to crypto-backed ETNs from Recognized Investment Exchanges (RIEs). The FCA highlighted the significance of an extended trading history for crypto assets, which offers investors valuable data and insights necessary to evaluate risk tolerance for crypto-based ETNs.
However, the FCA emphasized that crypto ETNs will exclusively target professional investors, including investment firms and credit institutions. This exclusion of retail investors is based on the belief that such investment products are deemed unsuitable for the retail market due to their inherent complexities and risks.
Furthermore, the FCA underscored the importance of stringent controls implemented by RIEs to safeguard the interests of professional investors. These controls are crucial for maintaining the integrity and stability of the market.
ETNs, typically issued by banks or investment managers, provide investors with a means to trade securities tracking crypto assets within London trading hours. This move by the LSE follows the remarkable success of Bitcoin exchange-traded funds (ETFs) in the United States since their launch on January 11, signaling growing institutional interest and acceptance of cryptocurrencies in mainstream financial markets.
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