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The LSE's move to list Bitcoin and Ethereum ETNs comes amid challenges and declining trading activity on the exchange.
The London Stock Exchange (LSE), home to leading blue-chip stocks, will debut Bitcoin and Ethereum exchange-traded notes (ETNs) on May 28, according to the exchange’s notice released today. The latest move comes after the exchange’s announcement that it would start accepting applications for crypto ETNs in the second quarter of this year.
Companies interested in listing their Bitcoin and Ethereum ETNs on the LSE’s new market can start submitting their applications on April 8, the LSE confirmed.
With the set launch date, issuers will have time to meet listing requirements and prepare necessary documents, including a prospectus that needs approval from the Financial Conduct Authority (FCA), the LSE noted. The exchange’s goal is to allow the maximum number of issuers to participate on the first day.
To be considered for the initial offering, issuers must submit a detailed letter and a draft base prospectus by 15 April, demonstrating their compliance with the requirements outlined in the Crypto ETN factsheet. The FCA’s approval of these prospectuses is mandatory for ETNs to be listed on both the Main Market and the Official List.
The LSE made it clear that issuers who do not meet the necessary criteria or miss the submission and approval deadlines will not be able to participate in the launch of the LSE’s Crypto ETN market.
Like exchange-traded funds (ETFs), ETNs also offer exposure to a basket of assets. However, these two differ in structure. An ETF is like a basket of stocks or other holdings that you partly own. An ETN is more like an unsecured debt note issued by a bank. The bank uses the proceeds to invest in assets that track a specific index. The value of the ETN reflects the performance of those assets.
When you buy an ETF share, you’re acquiring a portion of the underlying assets while buying an ETN means loaning your money to the bank in exchange for a note that promises a return based on the underlying index.
Under FCA regulations, the upcoming Bitcoin and Ethereum ETNs will be restricted to “professional investors” only. This means credit institutions and investment firms authorized to operate in financial markets will be the only ones able to participate, while retail investors are excluded.
A bid to increase profits?
According to a recent report from Bloomberg, the LSE is facing challenges that threaten its position as a leading financial hub. The number of companies listed on the LSE has fallen dramatically, with 2023 seeing the worst year for IPOs since 2009. Moreover, trading activity on the LSE has shrunk significantly compared to pre-crisis levels.
The report added that the LSE had fallen behind global rival exchanges. Several factors contributed to the struggle, including a shift in investor preferences, competition from other exchanges, and the regulatory landscape.
With increasing institutional investor interest, the digital asset market presents a booming opportunity for the LSE. If the exchange can create a regulated and secure environment for digital assets, this will attract investment and help the UK maintain its edge in the digital asset economy.
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