The London Stock Exchange plans to accept bids for exchange-traded bonds backed by bitcoin amid growing investor interest.

Amid the recent rise in Bitcoin prices and growing investor interest, the London Stock Exchange (LSE) has announced its plan to begin accepting applications for admission of Bitcoin-backed Exchange Notes (ETNs) in the second quarter of 2024.

ETNs, defined as debt securities that offer exposure to an underlying asset, allow investors to trade securities by tracking digital assets during trading hours in London. This move by the LSE will provide professional investors with a new opportunity to engage with the growing asset class, marking a major milestone in the integration of Bitcoin into traditional financial markets.

Exchange bonds: 3 main approval criteria

According to a statement released by the exchange on Monday, there are three main criteria that any proposed bonds must meet, including no leverage and being fully backed by Bitcoin. Secondly, the custodian or custodians responsible for the custody of the assets must comply with anti-money laundering regulations in force in the UK, European Union, Jersey, Switzerland or the United States.

Following the FCA's (British financial regulator Financial Conduct Authority) announcement of cryptocurrency ETNs, the London Stock Exchange announced that it will be accepting applications for admission of Bitcoin and Ethereum cryptocurrency ETNs in the second quarter of 2024.

Moreover, the proposed coins would also be required to store at least 90% of bitcoins in an offline escrow wallet or “subject to arrangements that provide the equivalent of cold storage.”

The huge success of Bitcoin spot ETFs.

The announcement comes amid a bullish run for Bitcoin, which recently topped $71,000 for the first time, recording a staggering gain of nearly 70% this year. This surge was largely driven by significant inflows into the recently launched US spot Bitcoin exchange-traded funds (ETFs).

Spot ETFs saw cumulative net inflows of $199 million on Friday, according to the latest data from BitMEX Research, a cryptocurrency exchange service and derivatives trading platform.

Notably, investors have poured more than $11 billion into new Bitcoin ETFs launched in the US over the past two months, causing a widespread surge in digital asset markets.

Strictly for professional investors

The LSE stressed that it will accept applications in accordance with its previously published information bulletin, with potential issuers being invited to participate in advance. The admission information sheet stated:

“To reduce the risk of delays in the acceptance schedule, the Exchange encourages early engagement by potential issuers interested in admitting crypto ETNs to trading on the Exchange.”

However, the LSE has clarified that these digital asset ETNs will be available exclusively to professional investors, as stated in the call for information.

FCA green light

At the same time, the United Kingdom's Financial Conduct Authority (FCA) has said it has no objection to Recognized Investment Exchanges (RIES) proposals to create a listed market segment for digital asset-backed ETNs.

Despite this development, the FCA remains steadfast in its position that Bitcoin ETNs and derivatives are not suitable for retail consumers due to the risks they pose. This cautious approach underscores ongoing regulatory oversight and the need to protect investors.

The LSE's decision highlights the growing convergence between Bitcoin and mainstream financial flows. Else's plans to facilitate trading of Bitcoin-backed ETNs reflect a broader trend among traditional financial institutions to embrace digital assets.