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The first UK cryptocurrency ETPs will launch on May 28th
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The UK’s first cryptocurrency exchange-traded products will finally begin trading next week, almost a decade after the first such vehicles appeared in Sweden.
Tree of wisdom and 21Shares have received the green light from the Financial Conduct Authority, the City’s regulator, to list ETPs investing in “physical” bitcoin and spot ether, the two most popular digital tokens, on the London Stock Exchange on May 28.
However, the ETPs – part of a flurry of similar vehicles expected to list on the LSE – will be available only to professional investors because the FCA has determined that “crypto derivatives are not suitable for retail consumers due to the harm they pose”.
This stance is in stark contrast to exchanges across much of continental Europe, as well as Australia, Brazil, Canada, Hong Kong and the United States, which offer crypto ETPs to both retail and institutional investors.
According to regulatory filings, U.S.-listed spot bitcoin ETFs already boast $50 billion in combined assets despite only launching in January, with about 80% of that held by retail investors.
A number of other crypto ETP managers, including ETC Group and CoinShares, are known to have applied to list vehicles on the LSE, ideally also on May 28 if they receive regulatory approval from the LSE. FCA in time.
“The FCA approval of the prospectus for our cryptocurrency ETPs represents a significant step forward for the sector and for UK-based professional investors seeking exposure to the asset class,” said Alexis Marinof, Head of Europe at WisdomTree, which manages $111 billion globally.
“While UK-based professional investors have been able to allocate into crypto ETPs via overseas exchanges, they will soon have a more convenient entry point. FCA approval in this regard could lead to greater institutional adoption of the asset class, as many professional investors have been unable to gain exposure to bitcoin and other cryptocurrencies due to regulatory limitations and uncertainty,” he added.
WisdomTree’s Physical Bitcoin (BTCW) and Physical Ethereum (ETHW) ETPs will have fees of 0.35%, the same as equivalent vehicles listed on a number of continental European exchanges.
Ophelia Snyder, co-founder of 21 Shares, which will cross-list its existing Bitcoin and Ethereum Staking ETPs in the UK, with fees of 1.49%, said: “London is home to one of the largest capital markets deep and liquid world – where there is proven institutional interest in cryptocurrencies.”
All UK-listed crypto funds will be constructed as exchange-traded securities, a common structure across the European cryptocurrency market. The FCA has only approved vehicles which invest in bitcoin and ether and which are not leveraged and physically backed.
Despite the ban on retail investors, issuers remain hopeful that there will be sufficient interest among UK-based professional investors to make cross-listing of their ETPs in London worthwhile.
Advised
More than 900 institutional investors have built up stakes in U.S.-listed bitcoin spot ETFs, SEC filings show, suggesting there may be an audience even for ETNs that are off-limits to retail investors.
“Hedge funds and small family offices have always had an appetite [for crypto ETFs]. Private banks and discretionary fund managers are a little more hesitant, but want to consider this asset class. Multi-asset managers are also considering it,” said Ravinder Azad, head of UK sales at WisdomTree. The company attracted 14 institutional investors to a cryptocurrency webinar in the UK earlier this year, but has already registered more than 140 registrations for a follow-up event in June, according to Azad.
Brown Brothers Harriman’s 2024 Global ETF Investor Survey, released this week, found that in the United States, Europe and Greater China, more institutional investors said they were optimistic about the prospects of digital assets than any other class of assets over the next 12 months.
However, one crypto ETF issuer who has no plans to list a product in the UK while retail investors remain banned told the FT: “You are launching a product that is not universal. It must be universal. This is the principle behind ETFs everywhere.”