- March 11, 2024
- Posted by: [email protected]
- Category:
The Financial Conduct Authority (FCA) in the United Kingdom has decided to grant approval for recognized exchanges to introduce crypto asset exchange-traded notes (cETNs). However, this regulation comes with a significant restriction, as these financial instruments will only be accessible to professional investors, including investment firms and authorized credit institutions. The FCA, in its announcement on Monday, emphasized the need for exchanges to facilitate cETNs to implement robust controls, ensure smooth trading operations, and provide protection for professional investors. Additionally, these cETNs must comply with all the requirements outlined in the UK Listing Regime, particularly those related to prospectuses and disclosures.
This decision by the FCA follows the recent approval of Spot Bitcoin exchange-traded funds (ETFs) in the United States, a development that has played a role in the notable success and upward surge in Bitcoin prices. Concurrently, the London Stock Exchange has revealed plans to accept applications for Bitcoin and Ethereum ETNs during the second quarter of 2024.
It’s noteworthy that the FCA’s decision to limit access to cETNs to professional investors underscores the cautious stance of the UK regulatory body when it comes to providing retail access to these financial products. This approach distinguishes the UK from other major global markets. In 2020, the FCA imposed a ban on UK firms offering or selling crypto derivatives and ETNs due to concerns related to market volatility. The regulatory body has consistently highlighted the substantial risks associated with these products, emphasizing the potential harm they pose to retail consumers.
The FCA’s unwavering warning about the high-risk nature of cryptoassets serves as a reminder for investors to be prepared for the possibility of losing their entire investment. This regulatory stance reflects the FCA’s commitment to consumer protection and its efforts to mitigate risks in the crypto sector.
The broader regulatory strategy adopted by the UK regarding cryptocurrencies follows a two-part approach. In October, the Treasury unveiled comprehensive proposals focused on regulating fiat-backed stablecoins, particularly their usage in payment systems. This initial step represents the commencement of the regulatory agenda, with plans for extending regulatory oversight to the broader cryptocurrency sector to be detailed in separate policy documents.
