The UK’s Financial Conduct Authority (FCA) has approved the first crypto exchange traded notes (ETNs) to be listed on the London Stock Exchange (LSE). The approval marks a significant institutional boost to the sector, indicating a potential shift in the UK’s financial landscape towards embracing digital assets.
The FCA has given the green light to crypto investment instruments from 21Shares, Invesco, and WisdomTree, marking the first time the UK financial regulator has approved a cryptocurrency security.
These ETNs are based on the values of Bitcoin and Ethereum, the two most prominent cryptocurrencies, which are currently the only digital assets permitted by the FCA.
Alex Pollak, head of UK for 21Shares, hailed the launch of Bitcoin and Ether ETNs on the LSE as a pivotal moment.
He noted that this development could pave the way for the UK to become the leading crypto hub in Europe.
“I think the fact that these products will now be available on the London Stock Exchange does show progress and I think within three years from now the UK will be home to the largest crypto exchange-traded fund market in Europe,” Pollak said.
Pollak also emphasized that while these ETNs are currently available only to professional investors, the true game-changer will be lifting the retail ban on trading these instruments.
Regulatory Approval Amid Caution
Despite the FCA’s cautious stance on the volatility and risks associated with crypto assets, it updated its position in March, indicating it would “not object to requests” to list crypto-backed ETNs.
ETNs are unsecured debt securities that provide returns based on the performance of underlying assets like Bitcoin and Ethereum and are traded and settled like regular shares.
The approval has been welcomed by industry stakeholders.
CryptoUK, a British trade body, expressed its pleasure with the FCA’s decision.
“The move is a step in the right direction for the UK, its equity markets, and the government’s aspiration to secure Britain as a global crypto asset hub,” said a CryptoUK spokesperson.
However, they also highlighted the need for more crypto-related instruments to be available to both institutional and retail investors to prevent the UK from falling behind the US, where interest in Bitcoin ETFs has surged.
The FCA’s approval comes at a time when the UK has been striving to position itself as a global leader in the digital asset market.
In April 2022, then-Chancellor and current Prime Minister Rishi Sunak announced plans to make the UK a “global crypto hub.”
However, progress has been slow, with the UK becoming one of the last major markets to resist the trading of crypto-related securities.
In contrast, the US Securities and Exchange Commission (SEC) approved the first US-listed Bitcoin ETFs in January, which are similar to London’s ETN products.
This approval has led to significant interest from traditional finance sectors, with major fund managers like BlackRock and Franklin Templeton increasing their allocations into Bitcoin through ETFs.
The listing of Bitcoin and Ether ETNs on the LSE represents a significant milestone for the UK’s financial markets, potentially setting the stage for the UK to become a major player in the global crypto asset sector.
While the current offerings are limited to professional investors, the move signals a broader acceptance and integration of digital assets into mainstream financial markets.
