On Monday, March 11, the London Stock Exchange (LSE) announced its readiness to accept applications for the admission of bitcoin and ethereum exchange-traded notes (ETNs) starting in the second quarter of 2024. This decision follows the Authority UK Financial Conduct Commission (FCA). ) decision to allow exchange-traded notes backed by cryptoassets.
LSE will accept bitcoin and ethereum ETNs
According to the LSE warning“This decision facilitates trading on exchanges that track the performance of crypto assets during London trading hours, providing investors with a regulated instrument to gain exposure to bitcoin and ethereum.”
The Exchange has outlined strict requirements for the admission of these crypto ETNs, emphasizing the importance of physical backing such as US spot ETFs, non-leveraged structures, and the need for the underlying cryptoassets to have a reliable and available market price. publicly. “The proposed crypto ETN must be physically backed, i.e., unleveraged, and have a market price or other measure of value of the underlying that is reliable and publicly available,” the fact sheet specifies.
Additionally, the LSE requires that the underlying cryptoassets be predominantly held in “cold storage” or under equivalent security arrangements, and custody must be held by entities that comply with AML regulations in specific jurisdictions. “The underlying cryptoassets must be held wholly or mainly in 'cold storage', which includes cold staking, or subject to arrangements that achieve an outcome equivalent to cold storage,” the LSE detailed, highlighting the importance of security in the custody of cryptocurrencies. assets.
The notice also makes clear that the LSE reserves the right to reject any application for admission of crypto ETNs, highlighting the exchange's commitment to maintaining the integrity of its market. “Regardless of whether an issuer can demonstrate all of the above factors, the Exchange reserves the right and has full discretion to reject an application for admission of any crypto ETN.”
Designed exclusively for professional investors, these ETNs represent a controlled expansion into the bitcoin and cryptocurrency sector within a strict regulatory framework intended to mitigate the inherent risks of cryptoasset volatility and security issues. The LSE's approach aligns with the FCA's ban on selling crypto derivatives and ETNs to retail consumers, signaling a cautious but progressive stance towards crypto integration into traditional financial markets.
Potential issuers are encouraged to engage with the LSE at an early stage to facilitate the admissions process. The Exchange's emphasis on early participation aims to “mitigate the risk of delay in the admission schedule,” ensuring a smooth process for the introduction of these innovative financial instruments.
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Overall, the London Stock Exchange's initiative to support bitcoin and ethereum ETNs marks a significant development in the crypto landscape, offering European professional investors regulated avenues to interact with digital assets. Shortly after the news became public, the price of bitcoin began to rise above $71,000.
Featured image created with DALL·E, chart from TradingView.com
