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Bitcoin prices rose on Monday to reach a new record high above $71,000, after Britain's financial watchdog 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 will not object to applications from recognized investment exchanges to create a UK-listed market segment for cryptocurrency-backed exchange-traded notes, or ETNs.
Exchanges will need to ensure they have adequate controls, so that trading is regulated and professional investors are provided with appropriate protection. It must meet all requirements of the UK listing regime, and make continuous prospectuses and disclosures.
Bitcoin's price rose more than 3% to $71,726.49 at around 4:30 a.m. EST, hitting a new all-time high. Ethereum rose nearly 2% to $4,014.90.
The London Stock Exchange acknowledged the financial watchdog's statement on Monday, saying in a separate statement that it would accept applications to accept bitcoin and ether ETNs from the second quarter of this year.
The FCA has made it clear that only professional investors will be able to purchase ETNs. The UK does not currently allow retail investors to buy ETNs or derivatives linked to cryptocurrencies, as it says they are too risky for consumers.
The financial watchdog said it still believes that cETNs – crypto-ETNs – and cryptocurrency derivatives are “unsuitable for retail consumers due to the harm they pose.”
“As a result, the ban on the sale of CETNs (and crypto derivatives) to retail consumers remains in place,” it noted.
The financial watchdog added that it “continues to remind people that crypto assets are high risk and largely unregulated. Those who invest should be prepared to lose all their money.”
The move from UK regulators comes after their US counterparts approved the first-ever Bitcoin spot trading funds.
The SEC has given the green light to ETFs from BlackRock, Fidelity, Grayscale, and other major companies, which are now live and trading.
Unlike an ETF, which is a fund that holds assets, an ETN is an unsecured debt security issued by a bank. It is usually linked to a market index or other benchmark. The ETN promises to pay the full value of the index at maturity, minus a management fee.
Bitcoin bulls have noted that this will lead to increased institutional investment in Bitcoin and other cryptocurrencies. They say this will in turn impact the price positively as riskier funds flow into the market.
The Financial Conduct Authority (FCA)'s decision to allow crypto-linked Bitcoin exchange-traded funds (ETNs) comes in the wake of opposition from the regulator. The Financial Conduct Authority (FCA) in 2020 banned the sale of cryptocurrency-linked ETNs and their derivatives to consumers, saying they were unsuitable for ordinary investors.
At the time, the FCA noted extreme volatility in cryptocurrency prices and financial crime in the secondary market as factors, adding that consumers “may suffer harm from sudden and unexpected losses.”
