Bitcoin Surges Past $72,000 as UK Regulator Greenlights Crypto-Linked ETNs

Bitcoin prices experienced a robust rally, reaching a new record high above $72,000, driven by a significant development from the British financial watchdog. The Financial Conduct Authority (FCA) announced its approval for exchanges to list cryptocurrency-linked exchange-traded products (ETPs) for the first time.

In a notice issued on Monday, the FCA revealed its willingness to entertain requests from recognized investment exchanges to establish a U.K.-listed market segment specifically for crypto-backed exchange-traded notes (ETNs). Exchanges seeking approval must adhere to stringent controls to ensure orderly trading and provide adequate protection for professional investors. Compliance with the U.K.’s listings regime, including issuing prospectuses and ongoing disclosures, is mandatory.

Bitcoin responded promptly to the news, surging over 3% to surpass $72,000, marking a fresh all-time high. Although it retraced slightly, hovering around $71,530, the rally signified the positive market sentiment spurred by the regulatory development. Ether, Bitcoin’s counterpart, also experienced a notable uptick, climbing over 2% to $4,041.23.

The London Stock Exchange acknowledged the FCA’s decision and revealed plans to accept applications for the admission of bitcoin and ether ETNs starting from the second quarter of this year.

However, the FCA clarified that only professional investors would be eligible to purchase these ETNs, emphasizing its stance on restricting retail investors from crypto-linked ETNs or derivatives due to perceived risks.

The FCA underscored its belief that crypto ETNs (cETNs) and crypto derivatives are inherently risky for retail consumers, stating that the ban on their sale to retail consumers remains in effect. The regulatory body cautioned investors about the high-risk nature of cryptoassets, emphasizing the unregulated environment and the potential for total loss of invested funds.

Significance of the Regulatory Move:

This regulatory development mirrors a trend seen in the United States, where the Securities and Exchange Commission (SEC) recently approved the first-ever spot bitcoin exchange-traded funds (ETFs). Major firms like BlackRock, Fidelity, and Grayscale received the SEC’s green light for ETFs, marking a significant step for institutional investment in cryptocurrencies.

In contrast to ETFs, exchange-traded notes (ETNs) are unsecured debt securities linked to a market index or benchmark. Despite being distinct from ETFs, ETNs hold potential for increased institutional investment in bitcoin and other cryptocurrencies, impacting market prices positively.

The FCA’s decision to permit crypto-linked bitcoin ETNs marks a notable shift from its previous stance in 2020 when it banned the sale of such products and derivatives to consumers. The regulator cited extreme price volatility and concerns about financial crime in the secondary market as primary reasons for the ban at that time.

As global regulators adapt to the evolving crypto landscape, the FCA’s move is seen as a significant step towards mainstream acceptance and institutional participation in the cryptocurrency market. The market anticipates increased investor confidence and potential positive price impacts as institutional money flows into the crypto space.

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