UK Regulator Will Allow Crypto-Related Securities

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The UK’s financial regulator will allow some bitcoin-related stocks to be listed on stock exchanges, easing its tough stance on digital assets as investors around the world flock to funds that invest directly in cryptocurrencies.

The Financial Conduct Authority said on Monday it would “not oppose” the creation of exchange-traded securities backed by bitcoin and ethereum for professional investors.

Issuers may request to list the notes linked to the bitcoin and Ethereum coins on the London Stock Exchange since April. ETNs are debt securities that track an underlying asset but are traded and settled through a central market entity such as a stock exchange and securities depository.

The news helped push bitcoin and ethereum higher. Bitcoin, the world’s largest cryptocurrency, hit $72,000 for the first time, while ethereum hit $4,000 for the first time since December 2021.

The UK has become one of the last major markets to resist trading in cryptocurrency-related securities, despite the government promoting the country as a potential hub for digital asset markets.

In 2021, the FCA banned cryptocurrency derivatives, which included exchange-traded products, due to concerns about the amount of leverage, or lending, available to consumers. Some dealers offered up to 100 times leverage on bitcoin.

The ban, which also covered unleveraged securities, has drawn strong criticism from members of the cryptocurrency industry, who argue that the UK cannot become a leading market for digital resources unless retail investors are provided with regulated and easy routes to access popular tokens like bitcoin.

“Bitcoin is by far the most well-known cryptocurrency and, given that it is so difficult for the UK public to buy, how can we claim to be a cryptocurrency hub if we only offer risky ways to buy this asset?” said Tim Lowe, strategy advisor at London-based institutional staking firm Attestant.

Regulators in other major markets are increasingly accepting investors’ ability to purchase cryptocurrency-related securities, as long as the securities are included in a regulated product.

Advised

The US approved spot bitcoin ETFs earlier this year, following EU countries, Australia and Canada. Hong Kong has also signaled that it will approve ETNs. The newly approved group of US bitcoin spot ETFs, including those issued by BlackRock and Fidelity, have collectively raised $10 billion since their launch in January, according to cryptocurrency investment group CoinShares.

“With greater understanding and data from a longer period of trading history, the FCA believes that exchanges and professional investors should now be able to better establish whether crypto-ETNs meet their risk appetite,” he said. the regulator said in a statement.

It continues to believe “that crypto derivatives are not suitable for retail consumers because of the harm they pose. Accordingly, the ban on the sale of ETNs . . . to retail consumers remains in effect.”

The LSE said the securities behind ETNs cannot be leveraged. They must be held in offline storage and held by custodians subject to anti-money laundering regulations in the UK, EU, Jersey, US and Switzerland.

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