The Financial Conduct Authority (FCA), a UK regulator, said it would not object to requests from recognized investment exchanges to set up a market segment for crypto-backed exchange-traded notes or ETNs to be listed in the U.K. The Monday notice from the British financial watchdog sent the price of Bitcoin to a new height of more than $72,000 for a brief period before it fell to more than $71,000. Ether rose by over 2 percent and traded at above $4,000.
The FCA requires exchanges to follow controls that would make trading orderly and offer proper protection to professional investors. The exchanges should meet requirements set by the U.K. listing regime, issue prospectuses, and make ongoing disclosures.
The FCA also declared that ETNs could be bought only by professional investors. The watchdog believes that crypto-linked ETNs or derivates carry high risks for consumers, so retail investors will not be able to purchase them.
The FCA also reiterated that “crypto assets are high risk and largely unregulated” and that investors must be “prepared to lose all their money.”
Following the FCA’s Monday notice, the London Stock Exchange released a statement stating that applications for admitting bitcoin and ether ETNs will be accepted in the second quarter of 2024.
The UK watchdog has allowed ETNs less than two months after the U.S. Securities and Exchange Commission (SEC) permitted ETFs from significant firms, some of which include BlackRock, Fidelity, and Grayscale, early this year, and these are now live and are being traded.
There are differences between ETFs and ETNs. An ETF is a fund with assets, while an ETN is an unsecured debt security. An ETN is issued by a bank and linked to a market index. After subtracting management fees, the index’s total value will be paid out at maturity. It is more volatile than an ETF as it is not linked to assets but to an index.
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