Updated March 11th, 2024 at 16:15 IST

UK regulator permits crypto exchange-traded notes for professional investors

Exchanges are mandated to ensure orderly trading and adequate protection for investors and crypto ETNs must meet all UK listing requirements.

Reported by: Business Desk
Representative | Image:Freepik
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FCA on crypto notes: Britain's financial watchdog announced on Monday that it will authorise recognised investment exchanges to introduce crypto-backed exchange-traded notes, joining other regulators in facilitating the trading of digital asset products. These products will be exclusively accessible to professional investors, such as investment firms and credit institutions authorised to participate in financial markets, stated the Financial Conduct Authority (FCA).

However, the FCA cautioned that crypto exchange-traded notes (ETNs) - financial instruments issued by institutions to mirror the performance of underlying assets - carry risks for retail investors.

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Exchanges are mandated to ensure orderly trading and adequate protection for investors, the FCA emphasised, noting that crypto ETNs must meet all UK listing requirements.

In recent months, the crypto market has experienced a surge in activity, as regulators globally, who have long cautioned against the volatility of cryptocurrencies like bitcoin, have begun approving digital asset investment products.

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On Monday, BTC reached a new high above $71,700, propelled by substantial investments into spot bitcoin exchange-traded funds approved by US regulators, and expectations of an imminent interest rate cut by the US Federal Reserve.

With a deeper understanding and more extensive trading data available, professional investors are now better equipped to assess whether crypto ETNs align with their risk tolerance, according to the FCA.

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In a separate statement, the London Stock Exchange announced that it would start accepting applications for the listing of bitcoin and ether ETNs from the second quarter of this year.

The FCA reiterated that crypto ETNs, along with derivatives, "are not suitable for retail consumers due to the risks involved," confirming that the ban on crypto ETNs and derivatives for retail consumers remains in place.

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"The FCA continues to underline that crypto assets carry high risks and are largely unregulated. Investors should be prepared to lose all their money," it concluded.

(With Reuters inputs)

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Published March 11th, 2024 at 16:15 IST