Crypto fans could soon see crypto exchange-traded notes on the London Stock Exchange
The London Stock Exchange (LSE) has revealed that it will begin accepting applications for Bitcoin and Ether cryptocurrency exchange-traded notes (ETNs) in the second quarter of 2024. The exchange confirmed on March 11 that applications following guidelines specified in its Crypto ETN Admission Factsheet would be accepted, but no exact date has yet been given.
The LSN factsheet states that crypto ETNs should be non-leveraged and physically backed. They should have a publicly available market price or value measure of the underlying asset and must be backed by Bitcoin or Ether.
The exchange also noted that the underlying crypto assets should be “wholly or principally” held in a cold wallet or something equivalent, in addition to being held by a custodian subject to UK Anti-Money Laundering laws, the EU, the US, or Switzerland.
The LSN defines ETNs as “debt securities which provide exposure to an underlying asset.” Crypto ETN investors can trade securities that track crypto assets’ performance during trading hours.
ETNs are widely considered a soft alternative to exchange-traded funds (ETFs). Unlike ETFs, ETNs are debt instruments supported by their issuers instead of a pool of assets. ETFs often focus on complicated debt procedures that don’t easily position into funds.
The UK’s Financial Conduct Authority (FCA) also recommends that exchanges ensure sufficient oversights to adequately safeguard investors are implemented. The FCA also requires that crypto-backed ETNs meet requirements such as ongoing disclosures and outlines, which are included in UK listings.
Exchanges can offer ETNs to institutions, but the FCA believes they’re ill-suited for retail investors because of ongoing risks and will remain banned. The regulator states, “The FCA continues to remind people that cryptoassets are high risk and largely unregulated. Those who invest should be prepared to lose all their money.”
