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UK allows professional investors to use crypto exchange-traded notes
By Tom Wilson
LONDON (Reuters) – Britain’s financial watchdog approved the launch of cryptocurrency-backed exchange-traded notes for professional investors on Monday, becoming the latest regulator to allow digital asset products while trying to protect individual investors.
Such products – bonds issued by financial institutions that track the performance of underlying assets – will only be available to investment firms and credit institutions authorized to operate in financial markets, the Financial Conduct Authority said (FCA) in a press release.
The FCA’s ban on exchange-traded notes (ETNs) and crypto derivatives for retail investors would remain, she said, calling them “ill-suited” because of the “harm they pose”.
The London Stock Exchange said in a separate statement on Monday that it will accept applications for listing of Bitcoin and Ether ETNs from the second quarter of this year.
The crypto market has surged in recent months after the US Securities and Exchange Commission (SEC) approved bitcoin spot exchange-traded funds, while calling the token a “speculative and volatile asset that is also used for illicit activities” and calling on investors to exercise caution.
Bitcoin hit a record high above $70,600 on Monday, boosted by the influx of liquidity into Bitcoin ETFs and expectations that the U.S. Federal Reserve will soon cut interest rates.
The FCA said that with “better understanding and data from a longer period of trading history”, professional investors can better determine whether crypto ETNs meet their risk appetite. Stock exchanges must ensure orderly trading and investor protection, he said.
However, reiterating warnings from recent years, the FCA said crypto was “high risk and largely unregulated” and that investors could “lose all their money”.
Jake Green, global head of financial regulation at law firm Ashurst, said the FCA’s position on crypto and retail investors was in a “state of flux”.
The watchdog “clearly does not want to get anywhere near” the idea that “retail investors can buy crypto in the form of an FCA-regulated financial instrument,” it said.
(Reporting by Tom Wilson; editing by Amanda Cooper, Louise Heavens and Barbara Lewis)