Bitcoin prices surged on Monday, reaching a new milestone above $72,000, following an announcement from the British financial regulator permitting exchanges to list exchange-traded products linked to cryptocurrencies for the first time.
The Financial Conduct Authority (FCA) revealed in a notice on Monday its decision not to object to requests from recognized investment exchanges seeking to establish a market segment in the UK for crypto-backed exchange-traded notes (ETNs). To ensure orderly trading and provide adequate protection for professional investors, exchanges must implement robust controls and comply with all UK’s listings regime requirements, including issuing prospectuses and maintaining ongoing disclosures.
The price of Bitcoin experienced a rapid ascent of over 3%, reaching $72,211.51 around 6:50 a.m. ET, marking a new peak. However, it subsequently dipped slightly and settled below $71,530.13 by 7:15 a.m. ET.
Meanwhile, Ether also saw a notable increase, rising by over 2% to $4,041.23.
The London Stock Exchange responded to the FCA’s announcement with its statement, indicating its readiness to accept applications for the admission of bitcoin and ether ETNs starting from the second quarter of this year.
The FCA emphasized that only professional investors would have access to purchase ETNs, as retail investors in the UK are currently prohibited from acquiring crypto-linked ETNs or derivatives due to their perceived high risk.
While acknowledging the potential risks associated with crypto assets, the FCA maintained that crypto ETNs and derivatives are unsuitable for retail consumers, reiterating the existing ban on their sale to this demographic.
In a cautionary note, the FCA reminded individuals that investing in crypto assets carries significant risks, emphasizing their high-risk nature and limited regulatory oversight, advising investors to be prepared for the possibility of losing their entire investment.
The recent move by UK regulators to permit the listing of crypto-linked exchange-traded notes (ETNs) marks a significant development for the cryptocurrency market, particularly in light of recent approvals in the United States for spot bitcoin exchange-traded funds (ETFs).
The Securities and Exchange Commission’s approval of ETFs from prominent firms such as BlackRock, Fidelity, and Grayscale represents a milestone, with these ETFs now actively traded.
Unlike ETFs, which function as funds holding assets, ETNs are unsecured debt securities issued by banks, typically tied to a market index or benchmark. ETNs pledge to pay out the full index value at maturity, minus management fees. Advocates for Bitcoin view this regulatory shift as a catalyst for increased institutional investment in Bitcoin and other cryptocurrencies. They anticipate a positive impact on prices as more substantial investments enter the market.
The decision by the Financial Conduct Authority (FCA) to permit crypto-linked bitcoin ETNs signals a departure from its previous stance. In 2020, the FCA prohibited the sale of crypto-linked ETNs and derivatives to retail consumers, citing concerns about suitability for everyday investors.
The FCA’s earlier concerns centered on factors such as extreme price volatility in cryptocurrencies and instances of financial crime in the secondary market, warning that consumers could face unexpected losses as a result.
However, the recent decision to allow crypto-linked ETNs suggests a shift in regulatory perspective, opening the door to greater participation from institutional investors in the crypto market.