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Bitcoin prices rose on Monday, hitting a new high above $71,000, after Britain’s financial regulator said it would allow exchanges to list cryptocurrency-related exchange-traded products for the first time.
The Financial Conduct Authority said in a notice on Monday that it would not oppose a request by a recognized investment exchange to create a UK listed market segment for cryptocurrency-backed exchange-traded notes (ETNs).
Exchanges need to ensure they have adequate controls in place to allow for orderly trading and provide appropriate protection for professional investors. They must meet all requirements of the UK listing regime, publication of a prospectus and ongoing disclosure.
At around 4:30 a.m. ET, Bitcoin prices surged more than 3% to $71,726.49, a record high. Ethereum rose nearly 2% to $4,014.90.
The London Stock Exchange acknowledged the FCA’s statement on Monday and said in a separate statement that it will accept applications for admission to Bitcoin and Ethereum ETNs starting in the second quarter of this year.
The FCA clarified that only professional investors can purchase ETNs. The UK currently does not allow retail investors to buy cryptocurrency-linked ETNs or derivatives because it says they are too risky for consumers.
The FCA stated that it continues to believe that cETNs (crypto ETNs) and crypto derivatives are “unsuitable for retail consumers due to the harm they cause.”
It states, “As a result, the ban on the sale of cETN (and cryptocurrency derivatives) to retail consumers remains in effect.”
The FCA added that it “continues to remind people that crypto-assets are highly risky and largely unregulated. Investors should be prepared to lose all their money.”
Why this is a big step forward for cryptocurrencies
The move by UK regulators comes after US regulators approved the first-ever spot Bitcoin exchange-traded fund.
The SEC gave the green light to ETFs from BlackRock, Fidelity, Grayscale and other major companies, and the funds are now online and trading.
Unlike ETFs, which are funds that hold assets, ETNs are unsecured debt securities issued by banks. It is usually tied to a market index or other benchmark. ETNs promise to pay out the full value of the index at maturity, minus management fees.
Bitcoin bulls noted that this will lead to increased institutional investment in Bitcoin and other cryptocurrencies. As more money floods into the market, this will have a positive impact on prices, they said.
Over opposition from regulators, the FCA decided to allow crypto-related Bitcoin ETNs. The FCA banned the sale of cryptocurrency-related ETNs and derivatives to consumers in 2020, saying they were not suitable for everyday investors.
At the time, the FCA cited extreme price volatility in cryptocurrencies and financial crime in secondary markets as factors, adding that consumers “could be harmed by sudden and unexpected losses.”
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