UK welcomes first crypto-backed ETPs

May 29th, 2024 | By | Category: Alternatives / Multi-Asset

21Shares and WisdomTree have each introduced multiple physically backed crypto exchange-traded products on the London Stock Exchange, catering specifically to professional investors.

UK welcomes first crypto-backed ETPs

The first crypto-linked ETNs have made their debut on the London Stock Exchange.

The listings follow the Financial Conduct Authority’s (FCA) new regulations from March, which now allow the trading of non-leveraged exchange-traded notes (ETNs) linked to Bitcoin and Ethereum—currently the world’s two largest cryptocurrencies.

ETNs are types of debt securities that mimic the performance of underlying assets, with trading and settlement facilitated by centralized market entities such as stock exchanges and securities depositories.

To qualify for listing on the London Stock Exchange, crypto ETNs must be entirely backed by physical holdings of Bitcoin or Ethereum, securely stored in cold storage by custodians compliant with stringent anti-money laundering regulations.

The revised regulatory framework in the UK has been met with approval from the digital assets sector, which previously criticized the FCA’s restrictive stance. Industry advocates argue that regulated, straightforward access to prominent cryptocurrencies like Bitcoin and Ethereum is crucial for the UK to establish itself as a premier global market for digital assets.

Despite these advancements, it is important to highlight that retail investors remain barred from purchasing crypto-related ETPs in the UK. This restriction positions the UK behind several major European markets where retail access to such ETPs is more broadly permitted.

21Shares

21Shares has introduced four ETNs: the 21Shares Bitcoin ETN (GBP: ABTC LN; USD: BTCU LN) and 21Shares Ethereum Staking ETN (GBP: AETH LN; USD: ETHU LN) both have an expense ratio of 1.49%, alongside the more cost-efficient 21Shares Bitcoin Core ETN (GBP: CBTC LN; USD: CBTU LN) and 21Shares Ethereum Core ETN (GBP: ETHC LN; USD: CETU LN), which boast expense ratios of just 0.21%.

Investors should note that the low price tags of the two ‘Core’ ETNs are achieved by participating in collateralized lending agreements which serve to cover operational costs. Loans are executed through institutional-grade partners, are overcollateralized, and are monitored daily to protect the interest of the ETP’s shareholders.

WisdomTree

WisdomTree, meanwhile, has brought two ETNs to market: the WisdomTree Physical Bitcoin ETN (GBP: WXBT LN; USD: BTCW LN) and WisdomTree Physical Ethereum ETN (GBP: WETP LN; USD: ETHW LN) are both priced at 0.35%.

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