London Stock Exchange pioneers Bitcoin and Ethereum ETN market

On Monday, the London Stock Exchange announced its plans to introduce a market for exchange-traded notes (ETNs) based on Bitcoin (BTC) and Ether (ETH) on May 28. Starting on April 8, the Stock Exchange will begin accepting applications for trading these crypto ETNs. The market's establishment is contingent upon approval from the Financial Conduct Authority (FCA), the U.K. regulator.

Earlier in March, the FCA announced its willingness to consider requests from Recognized Investment Exchanges (RIEs) to establish a listed market segment for ETNs, a decision welcomed by the London Stock Exchange. These ETN products will be restricted to professional investors exclusively. At that time, the London Stock Exchange outlined its intention to commence accepting applications for Bitcoin and Ether ETNs by the second quarter of the year.

Regulators in the UK have been taking steps to enhance the country's crypto-friendliness, aligning with multiple announcements from the U.K. Government aimed at establishing the nation as a hub for crypto activities.

Issuers intending to establish a Crypto ETN program and list their securities on the main market must submit requisite documentation, including a base prospectus, for FCA approval by April 15, 2024.

Exchange-traded notes (ETNs), akin to Bitcoin exchange-traded funds (ETFs), are traded on stock exchanges. However, ETNs differ in being unsecured debt securities backed by the issuer's credit, while ETFs are investment funds holding the assets they track, offering direct exposure. Consequently, ETNs involve credit risk due to reliance on the issuer's solvency, whereas ETF values are directly tied to their underlying assets.