Hot Topics

London Stock Exchange to accept Bitcoin and Ethereum crypto ETNs

Go to Imelda Cotton author's page
By Imelda Cotton - 
London Stock Exchange LSE Bitcoin Ethereum market ETN

The London Stock Exchange (LSE) has confirmed it will launch a marketplace for Bitcoin cryptocurrency exchange traded notes (ETNs) in May.

The decision follows the LSE’s notice earlier this month indicating its intention to allow the trading of crypto ETNs in the second quarter of the year.

At the time, the UK’s Financial Conduct Authority (FCA) said it would allow recognised investment exchanges to create a listed market segment for ETNs.

The products will be available to professional investors only, as per the FCA’s ban on the sale of crypto derivatives and ETNs to retail customers enacted in January 2021.

FCA approval

ETNs are debt securities that provide exposure to an underlying asset, while crypto ETNs track the performance of an underlying cryptoasset.

The FCA is required to confirm its approval before crypto ETNs can be listed on the main market and on the FCA’s official list.

To be approved, crypto ETNs must be physically backed and non-leveraged.

They must have a reliable valuation of the underlying market price and can only be denominated in Bitcoin or Ethereum.

The underlying assets must be held in cold storage in the UK, the European Union or the US, which is a licenced custodian of the UK’s Anti-Money Laundering Act.

In the event that no such storage exists, the issuer will have to gain third-party audit reports and secure regulated custodians.

Proposed start date

If FCA approval is received, the proposed date for the start of ETN securities trading is 28 May 2024.

“We have [chosen this date] to enable the maximum number of issuers to be present in the market on the first day of trading,” the LSE said.

“In choosing this date, we have taken into consideration that we need to ensure that issuers meet the requirements for consideration detailed in the crypto ETN fact sheet and importantly, it will also enable those issuers planning on admitting securities on the launch date, time to prepare documentation to establish a crypto ETN program which will require a base prospectus to be approved by the FCA.”

Currency lines

Issuers can, either simultaneously or in separate transactions, submit up to three different currency lines for the ETNs.

“Given the nature of the product and the admission guidance set out in the fact sheet, standard admission timelines do not apply to crypto ETNs,” the LSE said.

“Issuers and their advisers should liaise with the exchange at the earliest opportunity to discuss their proposed admission.”