London Stock Exchange to list digital asset ETNs after FCA approval

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The United Kingdom financial regulator has given the green light for digital asset exchange-traded notes (ETNs), but it will limit exposure to professional investors.

In a statement, the Financial Conduct Authority (FCA) confirmed that it would not object to requests to create digital asset-backed ETNs. However, the products are only available to professional investors, credit institutions, and investment firms.

The announcement signals a change of attitude toward digital asset investment products from the FCA. Three years ago, the agency announced a ban on all digital asset derivatives and ETNs for retail consumers and has been tough on the sector since.

However, digital asset investment products have surged globally since then, culminating in the approval of close to a dozen BTC spot ETFs in the U.S. in January. These ETFs have attracted over $21 billion, with BlackRock and Fidelity accounting for $17 billion. They have also led to a global wave of change as regulators warm up to digital asset products.

Hong Kong has indicated it would be willing to permit digital asset spot ETFs, and regulators in Singapore, Thailand, Australia, the United Arab Emirates, and Japan are also warming up.

In the U.K., the FCA says that it now believes “exchanges and professional investors should now be able to better establish whether ETNs meet their risk appetite.”

The agency noted that exchanges must ensure sufficient controls for orderly trading and investor protection as a condition for their approval.

“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.”

Following the approval, the London Stock Exchange (NASDAQ: LDNXF) announced that it welcomes applications for digital asset ETNs.

“The London Stock Exchange confirms it will accept applications for the admission of bitcoin and ethereum crypto ETNs in the second quarter of 2024,” its statement read.

The LSE will not allow any leveraged products linked to the digital asset ETNs. In an accompanying factsheet, the exchange also acknowledged that these ETNs “may be detrimental to the reputation and integrity of the exchange’s markets and/or the exchange.”

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