ETF Bitcoin: Rejection of applications by the SEC :


The US Securities and Exchange Commission (SEC) issued a letter on January 18 to two Wall Street groups that want to open Bitcoin-based Exchanges Traded Funds (ETFs). The SEC has received many such requests, but has denied none. Unlike the CFTC that allowed trading futures based on Bitcoin.

ETFs are investment products, they are traded in the same way as equities. They often take the form of index funds based on the variation of an underlying asset. It therefore varies up or down as the index it reproduces. In our case, the index would be the price of a digital currency.

Non-compliance of investment funds with the rules in force

The letter notes that investment companies based on cryptocurrency are not yet able to comply with SEC regulations. Dalia Blass, Director of Investment Management at the SEC, wrote in the letter:

"We are aware that cryptocurrency advocates have identified a range of potential benefits. We also know that critics of cryptocurrency have raised a number of concerns regarding transparency of information, trading, valuation and other issues related to the nature of the underlying assets. (...) In light of these considerations, we have important issues outstanding. In particular, how would the funds holding large amounts of cryptocurrency meet the requirements of the 1940 Act. "Dalia Blass

The Investment Companies Act of 1940 is the source of regulation for all investment funds and holding companies. The letter contains questions that the SEC must answer to consider the idea of ​​a fund based on digital currencies. According to Blass, the agency's concerns focus on five areas: valuation, preservation, arbitrage and potential manipulation. The SEC also views liquidity as a potential problem. Indeed, according to the 1940 law, a fund must be able to allow its investors to easily liquidate their assets at the end of each day.

The letter says this:
"Until the above issues can be satisfactorily addressed, we do not believe that it is appropriate for fund promoters to initiate the registration of funds that intend to invest substantially in cryptocurrency. . In addition, we have asked proponents who have filed registration statements for these products to withdraw them. Dalia Blass

Realization of worries

For the SEC, it is difficult to evaluate an ETF linked to cryptocurrency given the volatility of prices. In addition, the risk of fraud and manipulation, already mentioned in a bulletin of August 2017 relating to the ICO, is again included in this letter.

The sharp drop in all major digital currencies earlier this week underscores the concerns expressed by regulators around the world. Developments in China and South Korea over a possible ban on trading have thrilled investors. These ads brought Bitcoin below $ 12,000 on Tuesday. This is the second time that the entire market has suffered losses of more than 15% in one month. Finally, the crashes of certain exchanges during periods of affluence are also a brake on the liquidity of these potential ETFs.

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