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London Stock Exchange Opens Doors to Bitcoin and Ethereum ETNs for Professional Investors

This development represents a pivotal moment for the UK's cryptocurrency market, signaling a growing recognition of digital assets within the country's financial regulatory framework.

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The London Stock Exchange (LSE) announced on Monday that it will accept applications for the admission of Bitcoin and Ethereum crypto exchange-traded notes (ETNs) in the second quarter of 2024.

The exact launch date will be confirmed "in due course," LSE said.

The news comes right after the Financial Conduct Authority (FCA), the United Kingdom's financial industry watchdog, updated its position on crypto ETNs for professional investors.

ETNs provide exposure to an underlying asset, such as crypto, but unlike ETFs that monitor an asset or index, are debt securities, similar to bonds. They don't directly hold the assets they track but are backed by a financial institution. Crypto ETNs enable investors to trade securities that track crypto assets, on exchange, during London trading hours. Crypto ETNs admitted to trading on LSE will not be available to retail traders as they will only be available under trading segments specifically designated as “Professional investors only.”

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According to the LSE's admission factsheet, crypto ETNs must be physically backed and non-leveraged, have a market price or other value measure of the underlying that is reliable and publicly available; and have Bitcoin or Ethereum as the underlying cryptoassets.

Additionally, the underlying crypto assets must be held by a custodian or custodians that are subject to AML regulation in the United Kingdom, European Union, Jersey, Switzerland or United States.

The FCA said on Monday that it "will not object to requests from Recognised Investment Exchanges (RIEs) to create a UK listed market segment for crypto asset-backed Exchange Traded Notes (cETNs)" and added that it "continues to believe cETNs and crypto derivatives are ill-suited for retail consumers due to the harm they pose."

Consequently, the ban on the sale of crypto ETNs and derivatives to retail consumers, instituted in January 2020, remains in effect.

The FCA also reiterated its cautionary stance on crypto assets, reminding the public of their high-risk nature and largely unregulated status. "Those who invest should be prepared to lose all their money," the watchdog warned.