Crypto product provider ETC Group is launching its bitcoin-backed exchange-traded product (ETP) on a UK exchange using Swiss trading rules.
The UK-based ETC Group has traded $5.4 billion since it launched its initial BTC ETP on the German Stock Exchange. However, its attempt to follow that up on the London Stock Exchange stalled because the LSE’s clearinghouse doesn’t accept crypto products. Instead, ETC is offering its bitcoin ETP through another London-based regulated UK market, Aquis Exchange.
The UK listing of the BTC ETP is only possible because the security is already listed in Switzerland. This is where Aquis will also send it to be cleared. After the UK left the EU’s single market, the path for Swiss securities to resume trading in London opened up. This launch highlights the tensions in the UK surrounding the regulation of cryptocurrencies.
Crypto regulations in Britain
CEO of the ETC Group, Bradley Duke, feels that the UK would logically be at the center of this business. To him, it’s always been a hub for banking and innovation. However, in this instance, he says his business feels unwanted by the regulator. Another 50 companies also withdrew applications to the Financial Conduct Authority (FCA) to operate registered cryptocurrency businesses in Britain.
At the same time, there are others in the industry pushing for regulators to set some standards rather than serve outright rejection. For instance, UK financial lobbyist TheCityUK is advocating for greater protection regarding crypto assets. It believes that providing a nuanced response would help attract more crypto-based companies to London. CEO Miles Celic acknowledged that regulators have an important role to play in enabling good ideas to “mature and flourish.”
Ironically, as dismal as the situation looks in Britain, in some places in Europe it seems even more hopeless. “From Paris, the London legal framework position on cryptocurrency is much more mature, robust, and comprehensive than it is in France,” said Elie Le Rest, co-founder and partner at Paris-based digital assets fund manager ExoAlpha. He says that businesses in London are at least willing to explore relationships with crypto entrepreneurs. Apparently, in Paris, “bank accounts get closed and insurance is almost impossible to get for crypto businesses.”
Situation in Switzerland
Meanwhile, Switzerland is setting the standards that many crypto enthusiasts are envisioning. The alpine country has developed rules around crypto in order to become a world center for digital currencies. Crypto exchanges are welcome if they comply with rules combating financial crime and secure the proper licenses.
Cryptocurrency hedge fund Tyr Capital has been slowing ceding partners there away from London over the past 18 months. Tyr partner Edouard Hindi praised the country’s foundational framework and the cooperation seen from regulators. He said the Swiss Chamber of Commerce even helped facilitate his visa paperwork.
However rosy the Swiss perspective may seem, former CEO of London Stock Exchange Group, Xavier Rolet, says the model is unrealistic. Rolet said the framework the country has established only works within its borders, and would not be accepted cross-border. Therefore in his mind, it is not scalable. Instead, he argues that the ultimate solution would be for central banks to develop their own digital currencies. “If central banks come up with a global digital currency then these crypto products would disappear,” he said.
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