The London Stock Exchange has announced its plans to start accepting applications to list Bitcoin and Ethereum Exchange-Traded Notes (ETNs) in the second quarter of 2024. These ETNs function as IOUs for Bitcoin or Ethereum, safeguarded in secure locations.

## What are Crypto ETNs?

Crypto ETNs represent debts associated with particular cryptocurrencies, with their value mirroring the fluctuations in the value of these respective cryptocurrencies. Unlike bonds that pay regular interest, Crypto ETNs behave more like stocks. Financial institutions issue them, with payments based on market performance upon maturity.

Investors can trade Crypto ETNs on major exchanges akin to stocks, with the goal of benefiting from price discrepancies after accounting for fees.

## Risks of Investing in ETNs

While potentially lucrative, investing in ETNs comes with its fair share of risks. These include the likelihood of default by the issuer, price volatility stemming from liquidity challenges, and tracking errors should the ETN stray from its underlying index.

Other influencing factors on an ETN's value encompass the issuer's credit ratings and shifts in the political or economic landscape.

## Criteria for ETNs on the London Stock Exchange

To ensure the integrity of the listing process for Crypto ETNs, the London Stock Exchange has set specific criteria that issuers must meet. These include:

- The ETN must be physically backed (non-leveraged).
- A reliable and publicly available market price or value measure of the underlying asset must exist.
- The ETN must be backed by Bitcoin or Ethereum crypto assets.

Moreover, the cryptoassets supporting the ETN must be securely stored offline or through equivalent secure schemes, maintained by regulated custodians. Even if the issuer satisfies these criteria, the Exchange retains the authority to reject admission at its discretion.

## Recommendations for Issuers

To streamline the listing procedure for Crypto ETNs and avoid delays, the Exchange emphasizes early engagement. Unlike traditional listings, Crypto ETNs necessitate a unique approach. Issuers and advisors are encouraged to reach out proactively to the Exchange to initiate discussions regarding the admission process.

In conclusion, the forthcoming acceptance of Bitcoin and Ethereum ETNs on the London Stock Exchange poses a significant opportunity for investors, albeit accompanied by inherent risks that necessitate careful evaluation and proactive engagement during the listing process.

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