Crypto ETNs listed on the London Stock Exchange (LSE) are struggling to attract inflows due to a lack of institutional interest, according to crypto ETP providers. In May, 21Shares introduced four new physically-backed crypto exchange-traded notes, including the 21Shares Bitcoin ETN and the 21Shares Ethereum Staking ETN. WisdomTree and Invesco also listed Bitcoin and Ethereum ETNs on the LSE, with Invesco launching the Invesco Physical Bitcoin ETP carrying a total expense ratio of 0.39%.
These crypto ETNs track the performance of assets like bitcoin and ether and are traded and settled similarly to regular shares. However, these new products are limited to professional investors only under the regulations of the Financial Conduct Authority (FCA). The slow inflows since listing can be attributed to the LSE being late to the crypto investment party, according to HANetf co-founder Hector McNeil.
Due to FCA restrictions on retail consumers investing in these products, there is a lack of local retail interest to support trading volumes. Additionally, the absence of institutional demand, regulatory uncertainties, and competition from existing investment vehicles in Europe have also impacted the trading activity of these crypto ETNs on the LSE.
Laurent Kssis, an independent board member of Issuance Swiss AG, noted that institutional investors play a crucial role in driving trading volumes in traditional financial markets. He also highlighted the importance of market maker support for ensuring liquidity and efficient trading in these financial products. With only one market maker currently supporting these crypto ETNs, there is a need for increased support to attract more trading activity on the LSE.
