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News/UK Welcomes Bitcoin and Ethereum ETNs on London Stock Exchange

UK Welcomes Bitcoin and Ethereum ETNs on London Stock Exchange

Van Thanh Le

Mar 11 2024

3 months ago3 minutes read
Trading floor scene with a robot holding a Bitcoin symbol

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UK Embraces Crypto Investment with Regulated Bitcoin and Ethereum ETNs

The London Stock Exchange (LSE) is set to open its doors to Bitcoin and Ethereum investment in Q2 2024. This move comes hot on the heels of fresh guidelines from the UK's Financial Conduct Authority (FCA), showcasing a deliberate yet forward-thinking embrace of digital currencies. 

Offering a bridge between traditional investment mechanisms and the dynamic world of crypto, ETNs represent a significant leap, allowing investors to delve into Bitcoin and Ethereum through securities that mirror the digital assets' market performance, all within the regulated confines of the LSE during London trading hours.

Traditional trading floor vs Modern LSE with Bitcoin & Ethereum.webp

Aiming to mesh the innovative essence of cryptocurrencies with the security of regulated markets, the FCA's guidance has paved the way for this initiative, stipulating that these crypto ETNs, available solely to professional investors, must be physically backed and devoid of leverage to ensure stability and security. 

This directive ensures that the underlying digital assets are safeguarded, predominantly in cold storage, under the watchful eye of entities adhering to stringent Anti-Money Laundering standards across the UK, EU, Switzerland, or the US.

Despite the FCA maintaining a firm ban on the sale of crypto-focused derivatives and ETNs to retail consumers since January 2021, this development signals a robust, regulated pathway for professional investors to engage with cryptocurrencies. 

Interestingly, the LSE's announcement sparked an immediate bullish reaction in the crypto market, with Bitcoin's price momentarily breaching the $72,000 mark. This surge is attributed not only to the LSE's welcoming stance towards ETNs but also to the broader market's anticipation of Bitcoin's upcoming "halving" event, expected to constrict the supply of new Bitcoin, potentially inflating its price further.

chart.webp

This nuanced move by the LSE and FCA encapsulates the evolving relationship between traditional financial systems and the burgeoning world of digital assets. By introducing a regulated, physically backed avenue for professional investors, the UK is positioning itself at the forefront of crypto investment's integration into established financial infrastructures. 

Conclusion

This careful yet innovative approach highlights the UK's commitment to fostering financial innovation while ensuring a secure and orderly market environment, reflecting the growing recognition of cryptocurrency's potential within the framework of traditional investment vehicles.

FAQs

1. How can I invest in Bitcoin and Ethereum through the London Stock Exchange?

For now, only professional investors can invest in Bitcoin and Ethereum through the LSE. The investment option will be through Exchange-Traded Notes (ETNs) that mirror the price of Bitcoin and Ethereum, but not directly in the cryptocurrencies themselves.

2. What are the safety measures in place for these crypto ETNs?

The FCA requires these ETNs to be physically backed by the underlying cryptocurrencies (Bitcoin and Ethereum) and stored in secure cold storage facilities. Additionally, the custodians holding the crypto assets must meet strict anti-money laundering regulations.

3. Why did the price of Bitcoin go up after the LSE announcement?

The price increase is likely due to two factors.  The LSE's welcoming stance on crypto ETNs signals growing institutional interest in cryptocurrencies.  Secondly, the market is anticipating an upcoming Bitcoin "halving" event, which is expected to limit the supply of new Bitcoin and potentially drive up its price.

4.  Is the UK the only country where I can invest in crypto through regulated markets?

While the UK is taking a progressive step, it's not the only country exploring regulated crypto investment options. Other countries are also looking at similar avenues for institutional investors to participate in the cryptocurrency market.

This article has been refined and enhanced by ChatGPT. 

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