London Stock Exchange ETF Team Halved As Crypto Launch Looms

7Ary...USep

24 May 2024

London Stock Exchange Group Plc experiences a significant shift in its ETF team as two members out of four make an exit. This occurs as it prepares to list its first cryptocurrency-related products.

HIGHLIGHTS

Departure of key LSE ETF team members adds complexity ahead of the exchange's debut of crypto-related products.
Notable issuers such as WisdomTree, 21Shares, and Invesco are set to launch exchange-traded notes (ETNs) tied to Bitcoin and Ether.
Challenges arise in navigating regulatory changes and competition, with the US market already experiencing significant growth in crypto-based financial products.

London Stock Exchange Group Plc has recently experienced a significant change in its exchange-traded funds (ETF) team. The four-person team responsible for overseeing ETFs has been halved, leaving only two members as the exchange prepares to list its first cryptocurrency-related products. This reduction comes at a crucial time when the LSE is gearing up to introduce new offerings tied to digital currencies, highlighting the potential challenges in managing these new financial products with a diminished team.

Key Departures and Upcoming Crypto ETP Launches

Two prominent members of the LSE’s ETF team, Michael Stanley, head of exchange-traded products, and Hetal Patel, head of business development, have left the organization. A spokesperson for the LSE confirmed their departures but did not specify the timing. As the exchange anticipates the launch of exchange-traded notes (ETNs) linked to Bitcoin and Ether on May 28, the departure of these key figures is notable.
WisdomTree, 21Shares, and Invesco are among the approved issuers for these new crypto ETNs. Although crypto ETPs have been available in Europe for some time, UK regulatory constraints had previously prevented their listing in London until recent updates from the Financial Conduct Authority (FCA) in March. The LSE spokesperson expressed optimism about the growth prospects for these new crypto ETNs. Meanwhile, the LSE is actively seeking a new senior product manager for ETFs, with Patel indicating on LinkedIn her plans to start a new job in late July.
Also Read: Bitcoin Maxi Deems Ethereum ETF “Incredibly Bullish” For BTC, Here’s Why

Impact on Operations and Competitive Landscape

The LSE currently lists around 1,200 ETFs, according to Bloomberg data. The recent departures have complicated the feedback process for technical matters related to new applications, as noted by a senior executive at one of the potential crypto ETP issuers. This has introduced challenges in communication and clarity during the review process. In January, the US approved its first Bitcoin products, which have since amassed $60 billion in assets, and the SEC recently approved the first US ETFs based on Ether.
The LSE spokesperson reassured that their specialists have been collaborating closely with issuers to meet suitability requirements for new listed products. The review process for crypto applications involves both the FCA and the LSE, with the FCA approving prospectuses and the LSE handling the listing. The UK market for crypto ETPs is becoming increasingly competitive, especially as the US market has already seen significant growth.
Also Read: PEPE Price Rally: Smart Trader Nabs 1200% Profit Trading Pepe Coin

Spot Ethereum ETF: Top 5 Reasons Why SEC Offered Regulatory Nod

The SEC had initially been silent on the Spot Ethereum ETF decision, however, major changes in the political and regulatory space led to the historic approval of these investment products.

HIGHLIGHTS

The US SEC greenlighted eight Spot Ethereum ETF applications on Thursday, May 23.
A crucial factor in the landmark decision was the correlation between Ether Spot and Futures market.
The SEC was also influenced by the political players as the crypto community favored pro-crypto candidates in the upcoming presidential elections.

The iconic approval of eight Spot Ethereum ETFs by the U.S. Securities and Exchange Commission (SEC) marks a massive milestone in the evolution of crypto investment products. The decision, driven by various factors, reflects a nuanced approach to regulation and market dynamics. Here are the top five reasons behind the SEC’s nod to the Spot Ethereum ETF.

1. Correlation Between Ethereum Spot And Futures Market

A key factor in the SEC’s decision is the high correlation between the Ethereum spot market and CME Ethereum futures. Data from the SEC’s analysis confirms that the CME ether futures market has consistently shown high correlation with certain spot Ethereum trading platforms over the past 2.5 years.
The correlation values are impressive: 96.2% on an hourly interval, 85.7% on a five-minute interval, and 67.1% on a one-minute interval. Rolling three-month correlations further validate these findings. It ranges from 86.4% to 98.4% on an hourly interval, 75.8% to 90.2% on a five-minute interval, and 58.6% to 75.9% on a one-minute interval.
Such robust correlations provide the SEC with confidence that the CME ether futures market and spot markets are closely aligned. This reduces the risk of fraud and manipulation through comprehensive monitoring and sharing agreements.

2. Political Pressure Due to Upcoming U.S. Presidential Elections

The upcoming 2024 U.S. presidential elections have introduced a political dimension to the SEC’s decision-making process. Pro-crypto candidates like Robert F. Kennedy Jr. and Donald Trump have increased the political stakes surrounding cryptocurrency regulation. Moreover, this political landscape has influenced the Biden administration to adjust its stance on cryptocurrency.
Historically, the Biden administration has been tough on the crypto market. However, with younger voters being crucial for the Democrats, showing support for innovation and crypto could be strategically beneficial. This shift is seen as a move to appeal to a broader voter base by presenting a progressive stance on emerging technologies.
Also Read: ETH Price Struggles to Surge Even After Ethereum ETF Approval, Sell The News Soon?

3. Pressure From US Lawmakers

Bipartisan pressure from U.S. lawmakers has significantly influenced the SEC’s decision. On May 23, a group of House lawmakers, including Majority Whip Tom Emmer and Democrat Josh Gottheimer, sent a letter to SEC Chairman Gary Gensler. They urged the SEC to approve spot Ether ETFs and other digital asset products.
Moreover, they emphasized the need for regulated, transparent, and secure investment avenues for cryptocurrencies. The lawmakers highlighted that approval of such ETFs would offer investors regulated options while maintaining rigorous market surveillance and enforcement of securities laws.

4. Removal Of Staking Clause From Spot Ethereum ETF Applications

The removal of the staking clause from Spot Ethereum ETF applications was a crucial regulatory adjustment. On May 21, Fidelity updated its S-1 application to the SEC, clarifying that the underlying Ether (ETH) tokens would not be staked. This addressed concerns about the security and regulatory implications of staking activities.
Moreover, following Fidelity’s lead, other major players like Grayscale and BlackRock also removed staking clauses from their applications. Earlier, Ark 21Shares also initiated a similar move. Hence, the SEC might have weaponized the dynamics of ETH and staked ETH to grant approval.

5. Passing Of The FIT21 Bill

On May 22, House of Representatives passed the The Financial Innovation and Technology for the 21st Century Act (FIT21). The bill, which passed with a vote of 279 to 136, includes critical updates favorable to the crypto industry:

CFTC as leading regulator: The Commodity Futures Trading Commission (CFTC) is designated as the primary regulator for digital assets. This assigns clear roles to the CFTC and the SEC.
Clear regulatory distinctions: The bill clarifies that the CFTC will regulate functional and decentralized crypto assets, while the SEC will oversee those classified as securities but not decentralized.
Consumer protection: The bill establishes consumer protection measures, limiting the SEC’s authority over crypto exchanges and reducing regulatory uncertainty.

The FIT21 bill’s passage signals a more structured and balanced regulatory approach. Moreover, this development could have positively impacted the SEC’s decision on the Spot Ethereum ETF.
Also Read: Just In: VanEck rolls out Ethereum ETF ad minutes post SEC approval