UK Makes Major Move Into Crypto: First Exchange-Traded Products Set To Launch

The United Kingdom’s Financial Conduct Authority (FCA) has officially approved the first set of crypto exchange-traded products (ETPs), marking a significant development in integrating digital assets into the country’s financial landscape.

This move positions the UK to align with global financial centers that have already embraced this set of digital asset trading.

Regulatory Context and International Comparisons

WisdomTree Inc. announced that it had received approval from the FCA to list two physically-backed crypto ETPs that track Bitcoin and Ethereum on the London Stock Exchange.

As reported by Bloomberg, these products are slated to begin trading on May 28, highlighting a rapid progression from regulatory approval to market availability.

WisdomTree’s initiative is part of a broader trend, as other issuers, such as ETC Group, 21Shares, and CoinShares, have also applied to list their crypto products in the UK.

While these products will hold Bitcoin and Ethereum directly, they will be accessible only to “professional investors,” per FCA regulations.

This approach is somewhat stricter than that of the United States, where recent approvals of Bitcoin ETFs have seen these funds amass about $59 billion in assets — significantly more than the total for similar products in Europe.

Internationally, cryptocurrency ETPs have been available on several European stock exchanges for years. The US has seen considerable success with these products, especially after the Securities and Exchange Commission’s (SEC) approvals in January, which helped drive Bitcoin to record highs.

Hong Kong has also recently entered this market, although, according to Bloomberg, investors’ response has been quite “tepid.”

Crypto Spot ETFs Performance

Introducing these products in the UK is expected to energize the market further, particularly as similar products in the United States continue to experience strong inflows.

Data shows that spot Bitcoin exchange-traded funds in the US had their seventh consecutive day of net inflows, seeing roughly $305 million flowing into the products with significant contributions from BlackRock’s iShares Bitcoin Trust and the Fidelity Wise Origin Bitcoin Fund.

Good morning,

Yesterday’s ETF flows were positive for $305.7 million.

Blackrock did an impressive $290 million, Fidelity did $25.8 million.

After the big surge from Monday the price fell back from $71.5k to $69k. Now it’s sitting at $70k.
Need a couple of days of positive… pic.twitter.com/uZtBHS4auW

— WhalePanda (@WhalePanda) May 22, 2024

Meanwhile, in Hong Kong, the Ethereum ETFs recently launched by ChinaAMC have also seen notable inflows, suggesting a growing investor interest in these products. This positive flow appears to be driven by speculation surrounding the potential US approval of similar ETF products. 

Bloomberg analysts Eric Balchunas and James Seyffart have recently increased the estimated probability of the US SEC approving Ethereum spot ETFs from 25% to 75%, indicating a potential shift in regulatory attitudes.

This follows reports that the US Securities and Exchange Commission has requested exchanges to amend their 19b-4 applications.

In response, CboeBZX has so far filed amended applications for several ETFs, including the Franklin Ethereum Trust, Fidelity Ethereum Fund, VanEck Ethereum Trust, Invesco Galaxy Ethereum ETF, and the ARK 21Shares Ethereum ETF.

Featured image from Unsplash, Chart from TradingView