UK allows professional investors to use cryptocurrency exchanges to trade notes

  

Britain's financial regulator on Monday approved the launch of cryptocurrency-backed exchange-traded notes for professional investors, becoming the latest regulator to allow digital asset products while trying to protect retail investors.

The Financial Conduct Authority (FCA) said in a statement that such products - bonds issued by financial institutions that track the performance of the underlying assets - will only be available to investment firms and credit institutions authorized to operate in financial markets.

The FCA said the ban on cryptocurrency exchange-traded notes (ETNs) and derivatives for retail investors will remain in place, calling it "unsuitable" because "they can cause harm."

The London Stock Exchange said in a separate statement on Monday that it will accept applications for admission to Bitcoin and Ethereum ETNs starting in the second quarter of this year.

In recent months, the U.S. Securities and Exchange Commission (SEC) has approved a Bitcoin spot exchange-traded fund, while calling the token a "speculative, volatile asset and used for illegal activities" and urging investors to exercise caution. Crypto markets have surged in recent months. .

Bitcoin hit an all-time high above $70,600 on Monday, driven by an influx of cash into Bitcoin ETFs and expectations that the Federal Reserve will cut interest rates soon.

The FCA said that with “deeper insights and data from longer-term trading history,” professional investors can better determine whether cryptocurrency ETNs meet their risk appetite. The exchange said it must ensure orderly trading and protect investors.

However, the FCA reiterated warnings from recent years, saying cryptocurrencies are "highly risky and largely unregulated" and that investors could "lose all their money."

Jake Green, global head of financial regulation at law firm Ashurst, said the FCA’s stance on cryptocurrencies and retail investors was in a “state of flux”.

He said the regulator "clearly doesn't want to get close" to the idea that "retail investors can buy cryptocurrencies in the form of FCA-regulated financial instruments".