The UK's Financial Conduct Authority (FCA) is granting permission to professional investors to start issuing crypto-backed exchange-traded notes (ETNs).
The UK Approves Bitcoin and Ethereum ETNs for Professional Investors
The FCA declared on Monday that requests from recognized investment exchanges will no longer be objected from creating a UK listed market segment for this type of product.
ETNs represent a set of unsecured debt products that trace an underlying signal of securities. Their creation is directed by a financial institution, and they trade on a stock exchange.
"With increased insight and data due to a longer period of trading history, the FCA believes exchanges and professional investors should now be able to better establish whether cETNs meet their risk appetite," the financial regulator remarked.
Although the approval of ETNs is for professional investors only, this move represents a potential stage of progress towards wider crypto adoption.
The London Stock Exchange Group (LSEG) did not wait long before confirming it will start accepting requests for Bitcoin and Ethereum ETNs to be registered on the exchange that begins in the second quarter of 2024; the date of the launch remains undetermined.
FCA Cautions on Crypto as It Approves Bitcoin and Ethereum ETNs for Professionals
The FCA ensured that the ETNs are solely destined for professional investors, including credit institutions and investment firms, as the regulator believes they are better placed to comprehend the risk profile connected with these types of investments.
Despite this step forward, the Financial Conduct Authority is still cautious about crypto market investments. They declared in a statement: "crypto-assets are high-risk and largely unregulated. Those who invest should be prepared to lose all their money."
The country has been hesitant to give retail access to these products, which has left it somewhat isolated in comparison with other prominent international markets.
In 2020, the FCA banned UK companies from trading crypto derivatives as well as ETNs for different reasons, including the high volatility of the market. It emphasizes that these digital assets carry serious risks for retail customers that could result in potential harm. As a consequence, their sale remains prohibited.
The organization is currently working with the government, the financial industry, and international allies in order to grow a comprehensive regulatory framework for digital assets in the United Kingdom, since their ultimate goal is to position the country as a leader in the ever-evolving crypto market.
This first move represents the beginning of the FCA's regulatory agenda. Future ambitions to expand regulatory supervision to include the larger bitcoin industry will be covered in additional policy documents.