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The UK's financial regulator will allow some bitcoin-linked securities to be listed on the stock market, relaxing its tough stance on digital assets as investors around the world snap up money investing directly in cryptocurrencies.
The Financial Conduct Authority said on Monday that it “will not object” to the creation of trading securities backed by bitcoin and ethereum for professional investors.
Issuers can apply to list securities linked to Bitcoin and Ethereum on the London Stock Exchange from April. ETFs are debt securities that track the underlying assets but are traded and settled through a central market entity such as a stock exchange and securities depository.
The news helped push Bitcoin and Ethereum to all-time highs. Bitcoin, the world's largest cryptocurrency, reached $71,300, while Ethereum reached $4,000 for the first time.
The UK has become one of the last major markets to hold out against trading in crypto-linked securities, even though the government has been championing the country as a potential hub for digital asset markets.
In 2021, the Financial Conduct Authority (FCA) banned derivatives linked to cryptocurrencies, which included exchange-traded products, due to concerns about the amount of leverage, or borrowing, available to consumers. Some operators offer up to 100 times leverage on Bitcoin.
The ban – which also included non-leveraged securities – has drawn sharp criticism from members of the cryptocurrency industry, who argue that the UK cannot become a leading market for digital assets unless retail investors are given regulated and easy ways to access popular tokens such as Bitcoin.
“Bitcoin is the most popular cryptocurrency asset of all time, and because it is so difficult for the UK public to be able to purchase it, how can we claim to be a crypto hub if we only offer risky ways to buy these assets?” said Tim Lowe, strategic advisor at London-based institutional firm Attestant.
Regulators in other major markets have become increasingly comfortable with investors purchasing cryptocurrency-related securities, as long as the securities are in a regulated product.
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At the beginning of the year, the United States approved Bitcoin ETFs, after the European Union countries, Australia and Canada. Hong Kong has also indicated that it will approve ETNs. The newly approved group of U.S. spot bitcoin ETFs, including those from BlackRock and Fidelity, have collectively withdrawn $10 billion since their launch in January, according to cryptocurrency investment group CoinShares.
“With increased knowledge and data due to a longer trading history, the FCA believes that exchanges and professional investors should now be able to determine whether crypto ETNs meet their risk appetite,” the regulator said in a statement.
It continues to believe that “cryptocurrency derivatives are not suitable for retail consumers due to the harm they pose. As a result, the ban on the sale of ETNs was imposed…to retail consumers remains in place.”
The London Stock Exchange said that securities behind ETNs cannot be profited from. They must be kept in an offline storage vault and held by custodians subject to anti-money laundering rules in the UK, EU, Jersey, US and Switzerland.