The London Stock Exchange will soon accept applications to list Bitcoin and Ethereum ETNs in the second quarter of 2024. These ETNs are like IOUs for Bitcoin or Ethereum stored in a secure place.
The custodian must follow strict rules against money laundering and is only open to professional investors.
Crypto ETNs are debts linked to specific cryptocurrencies. Their value changes with the value of these cryptocurrencies.
They don’t pay interest regularly like bonds but act more like stocks. They are issued by financial institutions and pay based on market performance at the end.
Investors can buy and sell Crypto ETNs on major exchanges like stocks, aiming to profit from price differences minus any fees.
However, it’s crucial to note that investing in ETNs carries risks such as default risk from the issuer, liquidity issues affecting prices, and tracking errors if the ETN deviates from its underlying index.
Additionally, the value of an ETN can be influenced by factors like credit ratings of the issuer and changes in political or economic landscapes.
Criteria for ETNs
As per the London Stock Exchange, admission of Crypto ETNs will be considered only if the issuer can demonstrate to the Exchange’s satisfaction how it can meet the following criteria, both at the time of admission and continuously thereafter: the proposed Crypto ETN must be physically backed (non-leveraged), have a reliable and publicly available market price or value measure of the underlying asset, and be backed by Bitcoin or Ethereum crypto assets.
The underlying cryptoassets must be securely stored offline or through equivalent arrangements, held by regulated custodians. Even if the issuer meets these criteria, the Exchange noted that it reserves the right to refuse admission based on its discretion.
To prevent delays in the listing process for Crypto ETNs, the Exchange recommends early engagement. Unlike traditional timelines, Crypto ETNs require a different approach.
Issuers and advisors are urged to proactively contact the Exchange to kickstart discussions about the admission process.
