UK’s Landmark Move in Crypto Market
In a groundbreaking development for the UK’s cryptocurrency scene, asset managers WisdomTree and 21Shares have received approval from the Financial Conduct Authority (FCA) to introduce physically-backed bitcoin and ether exchange-traded products (ETPs) on the London Stock Exchange (LSE).
Key Points:
- WisdomTree and 21Shares have obtained approval from the UK’s Financial Conduct Authority (FCA) to list physically-backed bitcoin and ether exchange-traded products (ETPs) on the London Stock Exchange (LSE).
- The ETPs are scheduled to begin trading on May 28, making them the first crypto ETPs to be listed on the LSE.
- The FCA’s approval follows its adjustment of its stance on crypto ETPs in March, allowing them to be listed for professional investors only while maintaining the ban for retail investors.
- WisdomTree’s ETPs will feature a management expense ratio of 0.35%, marking one of the lowest fee levels for institutional-grade bitcoin and ether ETPs in Europe.
- The approval from the FCA is anticipated to eliminate entry barriers and could lead to increased institutional adoption of cryptocurrencies in the UK.
UK Embracing Crypto ETPs
The anticipated exchange-traded products (ETPs) that are set to be introduced on May 28 will represent the first instance of crypto ETPs on the LSE, nearly ten years after similar products debuted in Sweden.
- The FCA’s approval comes after the regulatory body shifted its stance on crypto ETPs in March, indicating that it would no longer oppose requests from financial institutions to list these products for professional investors.
- However, the prohibition on crypto derivatives products, including ETPs for retail investors, remains intact.
- This decision sets the UK apart from many other markets, with the availability of crypto ETPs being extended to both retail and institutional investors in places like continental Europe, Australia, Brazil, Canada, Hong Kong, and the United States.
WisdomTree & 21Shares Stepping In
WisdomTree, a US-based asset manager overseeing $111 billion globally, plans to list its WisdomTree Physical Bitcoin (BTCW) and WisdomTree Physical Ethereum (ETHW) ETPs with a management expense ratio of 0.35%. Alexis Marinof, head of Europe at WisdomTree, described the FCA’s approval as a
“significant advancement for the industry and UK-based professional investors looking for exposure to the asset class.”
He believes that this approval could potentially boost institutional adoption of cryptocurrencies in the UK, as many professional investors have previously faced limitations and uncertainty due to regulations.
- 21Shares, a Zurich-based firm, intends to cross-list its existing Bitcoin and Ethereum Staking ETPs in the UK, with fees set at 1.49%.
- Ophelia Snyder, co-founder of 21Shares, highlighted London’s status as a critical financial hub, noting the city’s deep and liquid capital markets alongside proven institutional interest in cryptocurrencies.
UK’s Crypto Funds Structure
The UK-listed cryptocurrency funds will be structured as exchange-traded notes (ETNs), a common framework in the European cryptocurrency market.
- The FCA has approved vehicles that invest in bitcoin and ether, are physically backed, and lack leverage.
- Despite the retail investor ban, issuers are optimistic regarding potential interest from UK-based professional investors, pointing to the success of US-listed spot bitcoin ETFs, which have attracted over 900 institutional investors.
Expected Institutional Interest
Ravinder Azad, head of UK sales at WisdomTree, noted a growing interest in digital assets among various institutional investors, with many showing appetite for crypto ETFs:
- Hedge funds, small family offices, private banks, discretionary fund managers, and multi-asset managers have all displayed interest.
- The company has witnessed a significant rise in interest, with over 140 sign-ups for a crypto webinar in June compared to just 14 institutional investors attending a similar event earlier in the year.
- A 2024 Global ETF Investor Survey by Brown Brothers Harriman indicated that institutional investors in the US, Europe, and Greater China were more bullish about digital assets’ prospects compared to any other asset class over the next 12 months.
The Future of Crypto ETPs in the UK
While the retail investor ban may limit the market potential, the FCA’s approval of these products signifies a significant milestone in the crypto industry’s evolution and potentially paves the way for increased institutional adoption in the future.
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