ETN Bitcoin: the London Stock Exchange's bluff

Wednesday, March 27, 2024

The London Stock Exchange announced the arrival of Bitcoin and Ether ETNs on 28 May, generating a fair amount of enthusiasm in Europe. But in reality, these products are not going to catch up with the United States and its ETFs.

There has been a degree of optimism in London over the past few days. Many are welcoming the London Stock Exchange's announcement to list Bitcoin and Ethereum ETNs from 28 May. Several commentators and crypto media have hailed a decision that could accelerate the adoption of cryptos in Europe, and even help to catch up with the US Bitcoin Spot ETFs, which got off to a flying start.

As Bloomberg pointed out on Tuesday, BlackRock's and Fidelity's Bitcoin ETFs had the 2 best starts in ETF history. There have been more than 11,000 ETFs over the past 30 years. Quite a performance!

The only problem is that the ETNs announced by the London Stock Exchange are not going to change much, for 3 reasons.

👉 The first concerns the type of product. The London Stock Exchange is going to list ETNs (Exchange Traded Notes), which are, as we have already explained previously, the equivalent of American ETFs in Europe.

Some ETNs are available to the general public, but those offered by the London Stock Exchange are going to be reserved for qualified investors, i.e. professionals.

"Only funds and investment companies will be able to buy them," confirms Benoît Pellevoizin, France director of CoinShares, one of Europe's leading asset managers specialising in crypto.

👉 The second reason has to do with all the constraints that will weigh on future Bitcoin and Ethereum ETNs. The ETNs are going to be validated by the UK's securities regulator (FCA), which will look at the prospectus, the custodian of the underlying assets and other elements.

"These are standards equivalent to what we see in traditional finance and so few crypto players have already achieved these standards," explains a good connoisseur of the subject. When approached, the London Stock Exchange declined to comment.

👉 The third reason - and perhaps the most important - is that these products have already been available in the UK for years for professionals, via other EU players (the Brexit has had no impact there), but they are simply not meeting with the expected success.

especially as "the European market is nowhere near as deep as the US market", as one investor points out.

This analysis is not investment advice. It has been prepared without taking into account your personal situation, particularly your financial situation, risk profile, and investment objectives.

Before investing in any product, investors should fully understand the risks involved and consult their own legal, tax, financial, and accounting advisors.

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