The London Stock Exchange (LSE) is set to introduce cryptocurrency exchange-traded notes (ETNs) that will monitor the performance of Bitcoin and Ether, with a launch date scheduled for May 28. The announcement on March 25 outlined that applications for these crypto ETNs could start being submitted by April 8, with the listing of successful funds in May, pending approval from the Financial Conduct Authority (FCA) of the U.K. In addition, applicants are required to provide a draft prospectus and a letter justifying their compliance with ETN criteria by April 15.

However, due to the FCA’s prohibition on the sale of crypto derivatives and ETNs to retail investors since January 2021, these ETNs will be accessible exclusively to professional investors. For approval, the crypto ETNs need to be physically backed and non-leveraged, accurately reflect the market price of the underlying assets (which can only be Bitcoin or Ether), and the assets must be secured in cold storage by a custodian licensed for Anti-Money Laundering in the U.K., European Union, or United States.

Issuers have the option to propose up to three different currency denominations for the ETNs. The LSE emphasized the unique nature of these products and the non-applicability of standard admission timelines, advising issuers and their advisors to engage with the Exchange as soon as possible to discuss admission plans.

This development comes in the wake of the U.S. Securities and Exchange Commission’s endorsement of spot Bitcoin ETFs earlier in January, although the U.K.’s version does not extend to retail investors. The FCA, in its biennial strategy, highlighted the tightening of regulations against crypto market misconduct as a key objective, aiming to enhance monitoring and enforcement mechanisms to safeguard market integrity. Additionally, last October, the FCA introduced stricter regulations on crypto-related advertising, warning of “robust action” against violations.