In a significant move, the UK’s Financial Conduct Authority (FCA) announced on Monday that recognised investment exchanges would be permitted to introduce crypto-backed exchange-traded notes (ETNs), signaling a step forward in the realm of digital asset trading products. However, the FCA cautioned that these products would exclusively be available for professional investors, including authorised investment firms and credit institutions operating in financial markets.
While the FCA emphasized the potential harm posed to retail investors by crypto ETNs—bonds issued by financial institutions tracking the performance of underlying assets—it stressed the importance of exchanges ensuring orderly trading and adequate protection for investors. The FCA specified that crypto ETNs must meet all the necessary requirements for UK listings.
With a surge in the crypto market and increasing global regulatory approvals for digital asset investment products, the FCA’s decision aligns with the evolving landscape. Bitcoin, for instance, reached a record high above $70,400 on Monday, propelled by substantial investments in spot bitcoin exchange-traded funds sanctioned by U.S. regulators.
The FCA acknowledged that professional investors, armed with greater insight and data from an extended period of trading history, are better equipped to assess whether crypto ETNs align with their risk appetite. The London Stock Exchange echoed this sentiment, announcing that it would start accepting applications for the admission of bitcoin and ether ETNs from the second quarter of this year.
Despite this opening for professional investors, the FCA maintained its stance on safeguarding retail consumers, emphasizing that crypto ETNs and derivatives remain unsuitable for this segment due to the associated risks. The regulatory body reinforced its warning about the high-risk and largely unregulated nature of cryptoassets, advising investors to be prepared for the possibility of losing all their invested funds.
