UK regulator to allow crypto exchange-traded notes for professional investors

Britain’s financial watchdog said on Monday (Mar 11) it will now permit recognised investment exchanges to launch crypto-backed exchange-traded notes, the latest regulator to pave the way for digital asset trading products.

These products would be only available for professional investors such as investment firms and credit institutions authorised to operate in financial markets, the Financial Conduct Authority (FCA) said in a statement.

However, the FCA warned that crypto exchange traded notes (ETNs) – bonds issued by financial institutions that track the performance of underlying assets – pose harm to retail investors.

Exchanges must ensure orderly trading and proper protection for investors, the FCA said, with crypto ETNs meeting all the requirements for UK listings.

The crypto market has surged in recent months as regulators globally – which have long warned of the risks from volatile cryptocurrencies such as bitcoin – approve digital asset investment products.

Bitcoin hit a record above US$70,400 on Monday, boosted by a flood of cash into spot bitcoin exchange-traded funds approved by US regulators, and hopes the US Federal Reserve will soon cut interest rates.

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The FCA said that with greater insight and data from a longer period of trading history, professional investors are now able to better establish whether crypto ETNs meet their risk appetite.

The London Stock Exchange said in a separate statement on Monday that it would accept applications for the admission of bitcoin and ether ETNs from the second quarter of this year.

The FCA said that crypto ETNs – as well as derivatives – “are ill-suited for retail consumers due to the harm they pose,” adding that the ban on crypto ETNs and crypto derivatives for retail consumers would remain.

“The FCA continues to remind people that crypto assets are high risk and largely unregulated. Those who invest should be prepared to lose all their money,” it added. REUTERS