On Monday, Britain’s financial regulator announced its decision to allow recognized investment exchanges to introduce crypto-backed exchange-traded notes (ETNs), joining other regulators in facilitating the launch of digital asset trading products.
These ETNs will be exclusively accessible to professional investors, including authorized investment firms and credit institutions operating in financial markets, according to the Financial Conduct Authority (FCA).
However, the FCA issued a cautionary note, highlighting the potential risks crypto ETNs could pose to retail investors. It emphasized the need for exchanges to ensure orderly trading and adequate investor protection, asserting that crypto ETNs must meet all UK listing requirements.
Amidst a surge in the crypto market, fueled by regulatory approvals of digital asset investment products globally, Bitcoin reached a record high above $70,400 on Monday. This surge was attributed to increased investment in spot bitcoin exchange-traded funds sanctioned by U.S. regulators, as well as anticipation of potential interest rate cuts by the U.S. Federal Reserve.
The FCA noted that professional investors now have access to more data and insights from an extended period of trading history, enabling them to better evaluate the suitability of crypto ETNs for their risk tolerance.
In a separate announcement on Monday, the London Stock Exchange revealed its plans to accept applications for the inclusion of bitcoin and ether ETNs starting from the second quarter of this year.
Despite these developments, the FCA reiterated its stance that crypto ETNs and derivatives are not suitable for retail consumers due to the associated risks. It reaffirmed the ban on crypto ETNs and derivatives for retail consumers, emphasizing the high-risk nature of cryptoassets and the lack of regulation in the space. Investors were cautioned to be prepared for the possibility of losing all their invested funds.
