- The London Stock Exchange will accept Bitcoin and Ether ETN applications in Q2 2024, enhancing credibility for digital currencies.
- ETNs must be physically backed by Bitcoin or Ether, stored in cold wallets, adhering to strict Anti-Money Laundering regulations.
The LSE has disclosed its intention to start processing submissions for Bitcoin and Ether ETNs during the second quarter of 2024. According to information provided in the LSE’s document regarding Crypto ETN admissions, it’s mandated that the backing for these financial products must come directly from Bitcoin or Ether, explicitly disallowing the application of leverage.
It also mandates that the digital assets supporting these ETNs be stored in cold wallets and managed following Anti-Money Laundering regulations in the United Kingdom, the European Union, Switzerland, or the United States.
This step by the LSE to incorporate Bitcoin and Ethereum ETNs into its offerings marks a development in the integration of digital currencies into wider financial markets, presenting multiple advantages for both the cryptocurrencies involved and potential investors.
The LSE’s willingness to process applications for Bitcoin and Ethereum ETNs boosts the credibility and acceptance of these digital currencies in traditional investment circles. This could attract a broader spectrum of investors, including those who may have been hesitant due to concerns over the security and regulatory status of digital currency investments.
For any new UK listed market segments initiated by an RIE, the FCA will evaluate cETN listing applications on an individual basis. The assessment will focus on whether the cETNs meet the listing criteria defined in the Listing Rules, ensuring that trading is conducted in an orderly fashion and that investors are duly protected.
Exchanges are required to implement safeguards to restrict market segment access to professional investors only. Furthermore, they must fully grasp the inherent risks associated with listing crypto-linked instruments and confirm that their admission and trading controls are sufficiently robust to mitigate these risks.
Professional investors, or ‘professional clients’, refer to entities like investment firms or credit institutions that must be licensed or regulated to operate within the financial markets.
The FCA is actively engaged with the government to evolve the UK’s regulatory approach to cryptoassets. Following the closure of the Discussion Paper on Stablecoins for feedback, from October 8, 2023, crypto firms aiming to market their products or services to UK consumers must adhere to new financial promotion rules, designed to align with existing regulations for high-risk investments.
The LSE’s focus on ensuring the physical backing and secure storage of the cryptocurrencies underlying the ETNs addresses widespread investor concerns regarding the safety of digital asset investments. This strategy not only secures these investments but also aligns them with strict anti-money laundering regulations, enhancing investor confidence in the governance of these instruments.
