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Haider Jamal

Mar 26, 2024

London Stock Exchange Will Add Bitcoin And Ethereum ETNs In May

The upcoming debut of Bitcoin (BTC) and Ethereum (ETH) exchange-traded notes (ETNs) on the London Stock Exchange (LSE) on May 28th, 2024, marks a significant development amid dwindling trading activity and challenges facing the exchange. The LSE, renowned for hosting top-tier blue-chip stocks, announced this move earlier today, following its earlier indication of accepting applications for crypto ETNs in the second quarter of this year.

Beginning April 8th of this year, companies keen on listing their Bitcoin and Ethereum ETNs on the new market can initiate the application process, as confirmed by the exchange. Ahead of the scheduled launch, issuers will have ample time to fulfill listing prerequisites and assemble requisite documentation, including a prospectus subject to approval by the Financial Conduct Authority (FCA), as noted by the LSE. The aim is to facilitate maximum issuer participation on the inaugural day.

 

The Application Process

To qualify for the initial offering, issuers must furnish a comprehensive letter and a draft base prospectus by April 15th, showcasing adherence to the criteria outlined in the Crypto ETN factsheet. Mandatory FCA endorsement of these prospectuses is imperative for ETNs to secure listing on both the Main Market and the Official List, as emphasized by the LSE.

Emphasizing stringent criteria and deadlines, the LSE clarified that issuers failing to meet these prerequisites will forfeit participation in the launch of the LSE Crypto ETN market. Comparable to exchange-traded funds (ETFs), ETNs afford exposure to a diversified array of assets. However, their structures diverge. While an ETF represents partial ownership of underlying assets, an ETN resembles an unsecured debt note issued by a bank. The bank employs proceeds to invest in assets mirroring a specific index, with the value of the ETN reflecting asset performance.

 

Getting Back On Track

Under FCA regulations, forthcoming Bitcoin and Ethereum ETNs will be exclusive to professional investors, limiting participation to authorized credit institutions and investment firms operating in financial markets, while retail investors are excluded.

Amid challenges threatening its stature as a premier financial hub, the LSE has faced a substantial decline in listed companies, with 2023 marking the lowest IPO activity since 2009. Moreover, trading volumes on the LSE have significantly contracted compared to pre-crisis levels. Factors contributing to these challenges include shifting investor preferences, competition via global exchanges, and regulatory dynamics.

With mounting interest by institutional investors, the digital asset market presents a lucrative opportunity for the LSE. Establishing a regulated and secure digital asset environment could attract investments and bolster the digital asset economy of the United Kingdom.

 

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