The UK’s first cryptocurrency exchange-traded products (ETPs) are set to commence trading next week, nearly a decade after similar vehicles debuted in Sweden. The Financial Conduct Authority (FCA), the City regulator, has authorized WisdomTree and 21Shares to list ETPs investing in physical spot bitcoin and ether on the London Stock Exchange (LSE) starting May 28.
Professional Investors Only
Despite this significant milestone, these ETPs will be accessible solely to professional investors. The FCA has determined that crypto derivatives pose substantial risks to retail consumers, thus deeming them unsuitable. This contrasts sharply with policies in continental Europe, Australia, Brazil, Canada, Hong Kong, and the US, where crypto ETPs are available to both retail and institutional investors.
Market Context and Competition
US-listed spot bitcoin ETFs, which launched in January, have amassed combined assets of $50bn, with approximately 80% held by retail investors. In the UK, other crypto ETP managers, including ETC Group and CoinShares, are also seeking regulatory approval to list on the LSE, potentially by May 28.
Industry Reactions
Alexis Marinof, head of Europe at WisdomTree, which manages $111bn globally, described the FCA’s approval as a significant advancement for UK-based professional investors desiring exposure to digital assets. Marinof noted that while these investors have had access to crypto ETPs via overseas exchanges, the local listing will provide more convenient access, potentially boosting institutional adoption.
WisdomTree’s Physical Bitcoin (BTCW) and Physical Ethereum (ETHW) ETPs will feature fees of 0.35%, mirroring those of equivalent vehicles on various European exchanges. Similarly, 21Shares will cross-list its Bitcoin (ABTC) and Ethereum Staking (AETH) ETPs in the UK, with fees set at 1.49%.
Institutional Interest and Future Prospects
The FCA has sanctioned only those vehicles that invest in Bitcoin and ether, are unleveraged, and physically backed. Despite the restriction on retail investors, issuers are optimistic about the interest among UK-based professional investors. More than 900 institutional investors have stakes in US-listed spot bitcoin ETFs, indicating a potential audience for these ETNs in the UK.
Ravinder Azad, head of UK sales at WisdomTree, highlighted growing institutional interest, with substantial sign-ups for a follow-up UK crypto webinar. A recent survey by Brown Brothers Harriman revealed that institutional investors in the US, Europe, and Greater China are more bullish about digital assets than any other asset class for the next 12 months.
Nonetheless, some crypto ETF issuers, citing the need for universal access, remain hesitant to enter the UK market while retail investors are excluded.
