Major investors have been given a boost for their digital asset arms as the UK markets watchdog says it will allow exchanges to set up a market for bitcoin-backed exchange traded notes.
The Financial Conduct Authority said it will “not object to requests” from UK bourses looking to create a listing segment for professional investors.
The regulator has consistently warned about the risks of cryptocurrencies for retail investors, blocking some 85% of crypto firms that have looked to set up in the UK for failing to prove they can stop money laundering through their platforms.
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The FCA said a number of caveats remain for exchanges wanting to list crypto ETNs. They must meet existing prospectus and disclosure rules, for example, and decisions will be made on a case-by-case basis.
But the decision to allow requests for the products will be a boon for exchanges looking to cash in on digital asset trading revenues as major banks and asset managers look to compete with native crypto firms. The London Stock Exchange will allow bitcoin and ether-backed ETNs, it said on 11 March.
“The London Stock Exchange confirms it will accept applications for the admission of bitcoin and ethereum crypto ETNs in the second quarter of 2024,” the LSE said.
The LSE said it would confirm exact launch dates in due course.
“Given the guidance and views published by the FCA in respect of cryptoassets, the exchange considers that the admission of certain securities representing cryptoassets may be detrimental to the reputation and integrity of the exchange’s markets and/or the exchange,” the LSE added in a factsheet. It will therefore allow no leveraged products.
Bitcoin prices have been on a tear in recent weeks, and topped $70,000 on 11 March, recovering from a prolonged dip in the wake of FTX’s collapse.
“With increased insight and data due to a longer period of trading history, the FCA believes exchanges and professional investors should now be able to better establish whether [crypto] ETNs meet their risk appetite,” the FCA said in a note published on its website.
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