Bitcoin prices skyrocketed on Monday, reaching a record-breaking peak above $71,000. This surge coincided with a significant announcement from the UK’s financial watchdog, the Financial Conduct Authority (FCA). The FCA declared it would no longer obstruct requests from recognized investment exchanges to establish a UK-listed market segment for cryptocurrency-backed exchange-traded notes (ETNs).
However, the FCA emphasized that stringent controls must be implemented by exchanges to ensure orderly trading and proper protection for professional investors. Additionally, exchanges need to comply with all UK listing requirements, including issuing prospectuses and maintaining ongoing disclosures.
The news sent shockwaves through the market, with Bitcoin’s value exceeding $71,726.49 at around 4:30 AM ET, marking a historic high. Ether, another prominent cryptocurrency, also witnessed a price increase of nearly 2%, reaching $4,014.90.
The London Stock Exchange echoed the FCA’s statement, confirming it would begin accepting applications for the listing of Bitcoin and Ether ETNs starting in the second quarter of 2024.
It’s crucial to understand that the FCA’s approval is currently limited to professional investors only. Retail investors in the UK are still prohibited from purchasing crypto-linked ETNs or derivatives due to concerns regarding potential risks. The FCA maintains the stance that these instruments are not suitable for retail investors due to their inherent volatility.
Why This Matters for Crypto:
This decision by UK regulators signifies a significant development in the cryptocurrency landscape, coming shortly after their counterparts in the US greenlit the first-ever spot Bitcoin ETFs. The US Securities and Exchange Commission (SEC) approved ETFs from major firms like BlackRock, Fidelity, and Grayscale, which are now actively traded.
It’s important to differentiate between ETFs and ETNs. An ETF directly holds the underlying assets it tracks, while an ETN is an unsecured debt obligation issued by a bank. ETNs typically track a market index or benchmark and promise to pay out the index’s value minus management fees upon maturity.
Proponents of Bitcoin believe this move will attract increased institutional investment into Bitcoin and other cryptocurrencies. This influx of substantial capital is expected to positively influence cryptocurrency prices.
The FCA’s decision represents a shift from their previous stance. In 2020, they prohibited the sale of crypto-linked ETNs and derivatives to retail investors, citing concerns about extreme price volatility and potential financial crime within the secondary market. Back then, the FCA expressed fear that consumers might face significant losses due to unexpected price fluctuations.
This information is not legal advice. Do your own research before making any decisions. Only invest what you can afford to lose and seek independent financial advice if needed. Understand the risks involved before purchasing any cryptoasset