Months after Bitcoin Exchange Traded Funds (ETFs) got approval in the US, the London Stock Exchange has announced the launch of a market for Bitcoin (BTC) and Ethereum (ETH) exchange-traded notes (ETN).
According to a notice issued by London Stock Exchange on 25th March, Crypto ETNs will be rolled out on May 28. The exchange will start accepting applications for trading Bitcoin and Ethereum ETNs from April 8, 2024.
However, BTC and ETH exchange-traded note market will be subject to approval from the Financial Conduct Authority (FCA) of the United Kingdom. Here’s a look at what do ETNs mean and what the London Stock Exchange has actually said.
What is an ETN and how is it different from ETF?
Like Exchange Traded Funds, Exchange Traded Notes or ETNs are also traded on a stock exchange. ETNs are, however, debt securities backed by the issuer’s credit. In contrast, ETFs are investment funds that directly holds the asset they track. In a way, ETFs provide a direct exposure to the underlying asset. ETNs also entail credit risk. While the value of ETNs hinges on the issuer’s solvency, the value of ETFs are directly linked to its underlying asset.
What should Indian investors know?
Crypto ETFs or Crypto ETNs are not available in India. In fact, investing in any crypto token or crypto-linked instruments is not advisable in India under current the regulatory climate. The Government and regulators in India have been warning Indian investors to stay away from crypto markets.
The Government of India has imposed heavy taxes on crypto income and crypto trading to dissuade people from investing in cryptocurrencies. Moreover, cryptocurrency exchanges in India are making it difficult for investors to withdraw their tokens. They are doing this to check illegal transactions.
What does the London Stock Exchange say?
The London Stock Exchange said it would accept applications for the admission to trading of Bitcoin and Ethereum Crypto ETNs in the second quarter of 2024. “We can confirm that applications can be made from 8 April 2024…the Exchange is proposing that the first day of admission to trading of those Crypto ETN securities will be Tuesday 28 May 2024,” it added.
The exchange further said that Crypto ETNs would be launched on 28th May to enable the maximum number of issuers to be present in the market on the first day of trading.
“In choosing this date we have taken into consideration that we need to ensure that issuers meet the requirements for consideration detailed in the Crypto ETN factsheet and importantly, it will also enable those issuers planning on admitting securities on the launch date, time to prepare documentation to establish a Crypto ETN programme which will require a base prospectus to be approved by the FCA,” it said.
Disclaimer: Investing in cryptocurrencies or crypto tokens are extremely risky. The above content is for informational purposes only. Please consult a SEBI-registered investment advisor before making any investment decision.
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