UK financial regulators have given approval for digital asset exchange-traded notes (ETNs), but will limit exposure to professional investors.
The Financial Conduct Authority (FCA) confirmed in a statement that it would not oppose requests to create digital asset-backed ETNs. However, this product can only be used by professional investors, credit institutions, and investment companies.
This announcement marks a change in the FCA’s attitude towards digital asset investment products. Three years ago, the agency announced a ban on all digital asset derivatives and ETNs for retail consumers and has been taking tough action on the sector ever since.
However, digital asset investment products have since proliferated globally, with nearly a dozen BTC spot ETFs approved in the United States in January. These ETFs raised more than $21 billion, with BlackRock and Fidelity accounting for $17 billion. There has also been a wave of change across the world as regulators turn their attention to digital asset products.
Hong Kong has signaled its intention to allow digital asset spot ETFs, while regulators in Singapore, Thailand, Australia, the United Arab Emirates and Japan are also gearing up.
The UK’s FCA believes that “exchanges and professional investors should be better able to ascertain whether ETNs meet their risk appetite”.
The agency noted that exchanges must ensure sufficient controls to ensure orderly trading and investor protection as a condition of approval.
“The FCA continues to remind people that cryptocurrencies are high risk and largely unregulated. Anyone who invests must be prepared to lose all their money.”
Following approval, the London Stock Exchange (NASDAQ: LDNXF) announced that it is welcoming applications for its digital asset ETN.
“The London Stock Exchange has confirmed that it will be accepting applications for approval of Bitcoin and Ethereum cryptocurrency ETNs in the second quarter of 2024,” it said in a statement.
The LSE does not accept leveraged products linked to digital asset ETNs. Additionally, in the attached fact sheet, the exchange acknowledged that these ETNs “may be detrimental to the reputation and integrity of the exchange markets and/or the exchange.”
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