Crypto on the LSE: London Stock Exchange to Launch Bitcoin and Ethereum ETN Products

• Institutional crypto products could begin trading on the LSE this summer.
• The UK’s FCA says these products will not be available for retail.
• Speculators see this as a positive step toward the “crypto hub” ambitions of the UK.

The London Stock Exchange (LSE) has penned May 28 as the date it will roll out markets for Bitcoin (BTC) and Ethereum (ETH) financial products for institutional and professional investors.

With London being one of the world’s financial centers, the launch of crypto-based exchange-traded notes (ETNs) on the LSE is nothing short of significant. But does it play into the UK’s ambitions of becoming a crypto hub?

Crypto in London

As per a market notice on March 25, 2024, the LSE has confirmed those wishing to list a Crypto ETN (cETN) can apply from April 8 to April 15, 2024. It also proposes May 28 2024 as the first day of trading.

Naturally, this has caused quite a buzz. ETNs could be considered the European equivalent of American exchange-traded funds (ETFs). This move not only sends bullish signals to traders, but it also highlights the increasing appeal of crypto.

An ETN tracks an underlying index or metric, and, unlike ETFs, does not hold the underlying assets it tracks. Another difference is that ETNs are unsecured debt securities that give exposure to the underlying assets, like bonds.

However, the LSE fact sheet for cETN applications interestingly states that cETNs must be physically backed and the underlying crypto assets must be held “wholly or principally” in cold storage wallets. Other methods of storage will require audit reports from a qualified third party.

Crypto ETNs Ill-Suited for Retail?

The notice comes just two weeks after the UK’s Financial Conduct Authority (FCA) said that it would “not object” to requests from Recognized Investment Exchanges (RIEs) to create crypto-backed ETNs. In return, the LSE hastily announced it would open the gates for cETN applications.

Despite this, the FCA maintained  it believes cETNs and crypto derivatives aren’t suitable for retail consumers “due to the harm they pose,” as they are “largely unregulated”.

According to industry stakeholders and experts, keeping retail investors out of such opportunities is “ridiculous “. This is because people can already buy the riskiest crypto assets through a range of approved platforms.

A Domino Effect?

The UK’s efforts to establish itself as a “Crypto Hub” through the creation and implementation of numerous laws and regulations have seen mixed results due to several factors.

Notably, the UK’s sitting government and current Prime Minister, Rishi Sunak, are unpopular in opinion polls. At some point this year, there will be a general election.

There are hopes of stablecoin regulations being implemented this summer. But so far, it seems that the UK is more interested in setting up a robust regulatory system that prioritizes combating money laundering, tax evasion, and other nefarious crypto asset activities.

With any luck, the launch of cETNs on the LSE will create enough interest from institutions and industry stakeholders, and perhaps lead to a more productive year for crypto in the UK.