Key takeaways:
- The UK’s FCA indicated that it would not oppose requests from RIEs to create a listed market segment for ETNs backed by cryptocurrency assets.
- The FCA warns consumers that investing in cryptocurrencies has a substantial risk of losing all of their money.
In a press release on Monday, the UK’s Financial Conduct Authority (FCA) indicated that it will not oppose requests from Recognised Investment Exchanges (RIEs) to create a listed market segment for exchange-traded notes (ETNs) backed by cryptocurrency assets. This move is indicative of the growing institutionalization of the cryptocurrency markets.
According to the FCA’s press release, professional investors, including credit agencies and financial businesses, would have access to the products. Exchange-traded notes (ETNs) are a kind of traded instrument that tracks an underlying index or assets and are typically offered by banks or investment managers.
As per the regulator’s statement, exchanges will be responsible for ensuring adequate controls are implemented to ensure orderly trade and appropriate safeguarding of professional investors.
In a market notice published on March 11, the London Stock Exchange (LSE) stated that it may list exchange-traded notes (ETNs) for Bitcoin and Ethereum by the second quarter of this year. This action is a big step toward cryptocurrencies being widely accepted in established financial markets.
ETNs are crucial for following underlying assets or indexes and, like exchange-traded funds (ETFs), are issued by banks or investment managers. ETNs provide an investment option similar to bonds, unlike ETFs, which require investing in a fund that holds the assets it monitors.
On Monday, Ethereum crossed $4,000, and Bitcoin burst through the $71,000 barrier. Trading these instruments is still prohibited for individual investors, though.
The regulator still maintains that retail consumers are not a good fit for cryptocurrency derivatives and asset-backed ETNs, which is why selling crypto ETNs to them is prohibited.
The FCA warns consumers that investing in cryptocurrencies has a substantial risk of losing all of their money.
